REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
TRIARC COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------
DELAWARE 38-0471180
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
-------------------
280 PARK AVENUE
NEW YORK, NEW YORK 10017
(212) 451-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
BRIAN L. SCHORR, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
TRIARC COMPANIES, INC.
280 PARK AVENUE
NEW YORK, NEW YORK 10017
(212) 451-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------
COPY TO:
PAUL D. GINSBERG, ESQ.
RAPHAEL M. RUSSO, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 AVENUE OF THE AMERICAS
NEW YORK, NY 10019-6064
(212) 373-3000
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this registration statement as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------
5% Convertible Notes
due 2023........................... $175,000,000 100% $175,000,000 $14,158
------------------------------------------------------------------------------------------------------------------
Class A Common Stock, par value
$0.10 per share.................... 4,375,000 shares (2) (3) (3) (3)
==================================================================================================================
(1) Estimated solely for the purposes of determining the
registration fee in accordance with Rule 457(o) under the
Securities Act and exclusive of accrued interest, if any.
(2) Includes 4,375,000 shares of Class A common stock issuable
upon conversion of the notes at the initial conversion price
of $40 per share of Class A common stock. Also includes,
pursuant to Rule 416 under the Securities Act, an
indeterminate number of shares of Class A common stock as
may be issued from time to time as a result of a stock
split, stock dividend, recapitalization or similar event.
(3) Pursuant to Rule 457(i), no additional fee is payable with
respect to the shares of Class A common stock issuable upon
conversion of the notes because no additional consideration
is payable in connection with the conversion privilege.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 19, 2003
$175,000,000
[TRIARC LOGO]
5% CONVERTIBLE NOTES DUE 2023 AND SHARES OF CLASS A
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
-------------------
Interest payable on May 15 and November 15
-------------------
This prospectus relates to the resale by various selling securityholders of
$175,000,000 aggregate principal amount of our convertible notes due 2023 and
shares of our Class A common stock into which the notes are convertible. The
selling securityholders will receive all of the proceeds from the sale of the
securities under this prospectus. We will not receive any proceeds from the sale
of securities under this prospectus by the selling securityholders.
You may convert the notes into shares of our Class A common stock at a
conversion rate of 25 shares per $1,000 principal amount of notes (equal to an
initial conversion price of $40 per share), subject to adjustment, before the
close of business on May 15, 2023 under any of the following circumstances:
(1) during any fiscal quarter commencing after June 29, 2003, if the closing
sale price of our Class A common stock exceeds 120% of the conversion price for
at least 20 trading days in the 30 consecutive trading days ending on the last
trading day of the preceding fiscal quarter; (2) subject to certain exceptions,
during the five business day period after any ten consecutive trading day period
in which the trading price per $1,000 principal amount of notes for each day of
the ten trading day period was less than 95% of the product of the closing sale
price of our Class A common stock and the number of shares issuable upon
conversion of $1,000 principal amount of the notes; (3) if the notes have been
called for redemption; or (4) upon the occurrence of certain corporate events.
Beginning May 20, 2010, we may redeem any of the notes at a redemption price of
100% of the principal amount of the notes, plus accrued interest. Holders may
require us to repurchase the notes on May 15 of 2010, 2015 and 2020 or upon a
fundamental change at a repurchase price of 100% of the principal amount of the
notes, plus accrued interest.
The notes are our general unsecured debt and will rank on a parity with all of
our other existing and future unsecured, unsubordinated debt and prior to all
subordinated debt.
For a more detailed description of the notes, see 'Description of the Notes'
beginning on page 30.
The notes are not listed on any securities exchange or approved for quotation
through any automated system.
Our Class A common stock trades on the New York Stock Exchange under the symbol
'TRY.' On June 18, 2003, the last reported sale price of our Class A common
stock was $29.82.
INVESTING IN THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVES RISKS. SEE 'RISK
FACTORS' BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission, nor any state securities
commission, has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------
The date of this prospectus is June , 2003.
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information.... ii
Incorporation by Reference............. ii
Summary................................ 1
Risk Factors........................... 10
Forward-Looking Statements............. 18
Ratio of Earnings to Fixed Charges..... 20
Use of Proceeds........................ 20
Price Range of Common Stock............ 21
Dividend Policy........................ 21
Capitalization......................... 22
Unaudited Pro Forma Condensed
Consolidated Financial Statements.... 23
Description of the Notes............... 30
Description of Our Capital Stock....... 44
Arby's Franchise Trust Securitization
Notes................................ 51
United States Federal Income Tax
Consequences......................... 52
Selling Securityholders................ 58
Plan of Distribution................... 61
Legal Matters.......................... 62
Independent Auditors................... 62
-------------------
As used in this prospectus, 'Triarc,' 'company,' 'we,' 'our,' 'ours' and
'us' refer to Triarc Companies, Inc. and its subsidiaries, except where the
context otherwise requires or as otherwise indicated.
i
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form S-3 with the Securities and
Exchange Commission regarding the offering of the securities offered by this
prospectus. This prospectus, which forms part of the registration statement,
does not contain all of the information included in the registration statement.
For further information about us and the securities offered by this prospectus,
you should refer to the registration statement and its exhibits.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy materials that we have filed
with the Securities and Exchange Commission at the Securities and Exchange
Commission public reference room located at 450 Fifth Street, N. W., Room 1024,
Washington, D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference room.
Our Class A common stock is listed on New York Stock Exchange under the
symbol 'TRY,' and our Securities and Exchange Commission filings can also be
read at the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
Our Securities and Exchange Commission filings are also available to the
public on the Securities and Exchange Commission's Internet website at
http://www.sec.gov.
We incorporate by reference into this prospectus the documents listed below
and any future filings we make with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
'Exchange Act'), as amended, including any filings after the date of this
prospectus, until all of the notes and Class A common stock to which this
prospectus relates are sold or the offering is otherwise terminated, other than
any portions of any such documents that are not deemed 'filed' under the
Exchange Act in accordance with the Exchange Act and applicable SEC rules and
regulations. The information incorporated by reference is an important part of
this prospectus. Any statement in a document incorporated by reference into this
prospectus will be deemed to be modified or superseded to the extent a statement
contained in (1) this prospectus or (2) any other subsequently filed document
that is incorporated by reference into this prospectus modifies or supersedes
such statement.
INCORPORATION BY REFERENCE
We are incorporating by reference into this prospectus the following
documents filed by us with the SEC:
o Annual Report on Form 10-K for the fiscal year ended
December 29, 2002, filed on March 28, 2003;
o Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 2003, filed on May 12, 2003;
o the description of the Class A common stock contained in the
Registration Statement on Form 8-A, filed pursuant to
Section 12 of the Exchange Act on November 4, 1993, and any
amendment or report filed for the purpose of updating such
description;
o Current Reports on Form 8-K, filed on January 21, 2003,
March 27, 2003, May 14, 2003, May 19, 2003 and June 3, 2003;
and
o all other documents filed pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of the offering
other than any portions of any such documents that are not
deemed 'filed' under the Exchange Act in accordance with the
Exchange Act and applicable SEC rules and regulations.
You should rely only on the information contained in this document or that
information to which we have referred you. We have not authorized anyone to
provide you with any additional information.
The documents incorporated by reference into this prospectus are available
from us upon request. We will provide a copy of any and all of the information
that is incorporated by reference
ii
in this prospectus to any person, without charge, upon written or oral request.
Requests for such copies should be directed to the following:
Triarc Companies, Inc.
280 Park Avenue
New York, New York 10017
Attention: Investor Relations
Telephone: (212) 451-3000
Except as expressly provided above, no other information, including information
on our web site, is incorporated by reference into this prospectus.
iii
SUMMARY
This summary contains basic information about us and this offering. Because
it is a summary, it does not contain all of the information that you should
consider before investing. You should read this entire prospectus and all the
information that it incorporates by reference carefully, including the section
entitled 'Risk Factors' and our financial statements, the related notes and the
management discussion and analysis of our financial condition and results of
operations for the periods covered by those financial statements, all of which
are incorporated by reference into this prospectus, before making an investment
decision.
THE COMPANY
We are a holding company and, through Arby's, Inc. and its subsidiaries, the
franchisor of the Arby's'r' restaurant system and, through Sybra, Inc., an
operator of approximately 240 Arby's restaurants located in the United States.
As the franchisor of the Arby's restaurant system, we license the owners and
operators of independent businesses to use the Arby's brand name and trademarks
in the operation of Arby's restaurants. We provide franchisees with services
designed to increase both the revenue and profitability of their Arby's
restaurants. The more important of these services are providing strategic
leadership for the brand, quality control services, operational training and
counseling regarding, and approval of, site selection.
The key elements of our business strategy include (i) using our resources to
grow our restaurant franchising and operations business, (ii) evaluating and
making various acquisitions and business combinations, whether in the restaurant
industry or otherwise, (iii) building strong operating management teams for each
of our current and future businesses and (iv) providing strategic leadership and
financial resources to enable these management teams to develop and implement
specific, growth-oriented business plans. The implementation of this business
strategy may result in increases in expenditures for, among other things,
acquisitions and, over time, marketing and advertising.
Our cash, cash equivalents and short-term investments (including restricted
cash) at March 30, 2003, after giving effect to the initial offering of the
notes and the application of the net proceeds therefrom, totaled approximately
$784 million. Prior to giving effect to the initial offering of the notes and
the application of the net proceeds therefrom, at March 30, 2003, our
consolidated long term debt, including current portion, was approximately $379
million. Of this amount, approximately $253 million is debt issued by
subsidiaries of Arby's, and $96 million is debt issued by Sybra. We have
guaranteed approximately $3 million of the debt issued by our restaurant
business subsidiaries. In addition, we have guaranteed obligations of third
parties as described more fully in our annual and quarterly reports which are
incorporated by reference into this prospectus. None of our cash, cash
equivalents and investments (other than approximately $30.5 million of
restricted cash) secure such debt. We are evaluating our options for the use of
our significant cash, cash equivalents and investment position, including
acquisitions, share repurchases and investments.
Our corporate predecessor was incorporated in Ohio in 1929. We
reincorporated in Delaware in June 1994. Our principal executive offices are
located at 280 Park Avenue, New York, New York 10017 and our telephone number is
(212) 451-3000. Our website address is: www.triarc.com. Information contained on
our website is not part of this prospectus.
RECENT DEVELOPMENTS
On December 27, 2002, we completed the acquisition of all of the capital
stock of Sybra, the second largest franchisee of the Arby's brand, pursuant to a
plan of reorganization previously confirmed by the United States Bankruptcy
Court for the Southern District of New York on November 25, 2002. Sybra
currently owns and operates approximately 240 Arby's restaurants in
1
nine states, primarily in Michigan, Texas, Pennsylvania, Florida and New Jersey.
In fiscal years 2001 and 2002, Sybra had revenues of approximately $200 million
and $209 million, respectively.
We acquired Sybra for approximately $8.3 million paid to its parent's
creditors. In addition, we invested approximately $14.2 million in Sybra. Sybra
remains exclusively liable for its long-term debt and capital lease obligations,
which aggregated to approximately $96 million as of March 30, 2003. We have also
made available to Sybra a $5.0 million standby financing facility for each of
three years after the closing of the purchase on December 27, 2002 (up to $15.0
million in the aggregate) to fund any operating shortfalls of Sybra. As of
May 31, 2003, $700,000 was outstanding under this facility. In addition, we
loaned approximately $9.9 million to Sybra to prepay existing indebtedness.
SECURITIES BEING OFFERED
This prospectus covers the sale of $175,000,000 aggregate principal amount
of 5% Convertible Notes due 2023, plus the shares of Class A common stock that
may be issued from time to time upon conversion of the notes. The shares of
Class A common stock may be offered by the selling securityholders following
conversion of the notes.
We issued and sold $175,000,000 aggregate principal amount of 5% Convertible
Notes due 2023 on May 19, 2003 in a private offering. These notes were resold by
the initial purchaser in transactions exempt from the registration requirements
of the Securities Act to persons reasonably believed by the initial purchaser to
be 'qualified institutional buyers' (as defined in Rule 144A under the
Securities Act).
2
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth for the periods and as of the dates indicated
our summary historical consolidated financial data and our summary consolidated
pro forma financial data after giving effect, as applicable, to the acquisition
of Sybra, Inc. and the issuance of the notes and use of the related proceeds.
The summary consolidated financial data (i) as of December 29, 2002 and
December 30, 2001 and for each of the fiscal years in the three-year period
ended December 29, 2002 are derived and reclassified from the audited
consolidated financial statements included in our Annual Report on Form 10-K for
our fiscal year ended December 29, 2002 incorporated by reference in this
prospectus and (ii) as of December 31, 2000, January 2, 2000 and January 3, 1999
and for each of the years in the two-year period ended January 2, 2000 are
derived and reclassified from our audited consolidated financial statements,
which are not included elsewhere in this prospectus or incorporated by
reference. The summary consolidated financial data presented as of March 30,
2003 and for the three-month periods ended March 30, 2003 and March 31, 2002
have been derived from our unaudited condensed consolidated financial statements
included in our Quarterly Report on Form 10-Q for the quarter ended March 30,
2003 incorporated by reference in this prospectus. In our opinion, the unaudited
quarterly consolidated financial data contains all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of our
results for those periods. Our results of operations for the three-month period
ended March 30, 2003 are not necessarily indicative of the results that may be
expected for our entire fiscal year. The summary consolidated financial data
should be read together with our consolidated financial statements and
accompanying notes, as well as management's discussion and analysis of financial
condition and results of operations, all of which can be found in publicly
available documents, including those incorporated by reference in this
prospectus. Our summary consolidated pro forma financial data are derived from
the 'Unaudited Pro Forma Condensed Consolidated Financial Statements' included
elsewhere in this prospectus and should be read together with those statements
and accompanying notes. The ratio of earnings to fixed charges was taken from
the 'Ratio of Earnings to Fixed Charges' included elsewhere in this prospectus
and should be read together with that disclosure.
3
HISTORICAL PRO FORMA
--------------------------------------------------------------------- ---------
YEAR ENDED(2)
------------------------------------------------------------------------------------
DECEMBER 29,
JANUARY 3, JANUARY 2, DECEMBER 31, DECEMBER 30, -----------------------
1999(1) 2000(1) 2000(1) 2001 2002 2002
------- ------- ------- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA(3):
Revenues:
Net sales....................... $ -- $ -- $ -- $ -- $ -- $208,260
Royalties and franchise and
related fees................... 78,429 81,658 87,450 92,823 97,782 90,317
-------- --------- ---------- -------- -------- --------
78,429 81,658 87,450 92,823 97,782 298,577
-------- --------- ---------- -------- -------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and amortization.. -- -- -- -- -- 149,939
Selling, general and
administrative................. 62,998 68,498 80,212 (9) 77,355 (10) 75,893 118,644 (13)
Depreciation and amortization,
excluding amortization of
deferred financing costs....... 4,916 5,423 5,313 6,506 6,550 13,749
Capital market transaction
related compensation........... -- -- 26,010 (9) -- -- --
Capital structure reorganization
related change................. -- 2,126 (7) 306 -- -- --
-------- --------- ---------- -------- -------- --------
67,914 76,047 111,841 83,861 82,443 282,332
-------- --------- ---------- -------- -------- --------
Operating profit (loss)...... 10,515 5,611 (7) (24,391)(9) 8,962 15,339 16,245 (13)
Interest expense.................. (13,031) (1,260)(7) (4,804) (30,447) (26,210) (46,036)
Insurance expense related to
long-term debt.................. -- -- (550) (4,805) (4,516) (4,516)
Early extinguishment of debt...... -- (2,351)(7) -- -- -- --
Investment income, net............ 9,863 16,904 30,715 33,632 851 553
Costs of proposed business
acquisitions not consummated.... (900) (416) -- (623) (2,238) (2,238)
Gain (loss) on sale of businesses,
net............................. -- 1,188 -- 500 (1,218) (1,218)
Other income, net................. 1,572 2,827 1,241 10,191 1,358 1,446
-------- --------- ---------- -------- -------- --------
Income (loss) from continuing
operations before
income taxes and minority
interests.................. 8,019 22,503 (7) 2,211 (9) 17,410 (11) (16,634) (35,764)(13)
(Provision for) benefit from
income taxes.................... (4,832) (6,328)(7) (12,368)(9) (8,696)(11) 3,329 9,619 (13)
Minority interests in loss of a
consolidated subsidiary......... -- -- -- 252 3,548 3,548
-------- --------- ---------- -------- -------- --------
Income (loss) from continuing
operations................. 3,187 16,175 (7) (10,157)(9) 8,966 (11) (9,757) $(22,597)(13)
--------
--------
Income (loss) from discontinued
operations...................... 11,449 (6) (6,051)(7) 451,398 (9) 43,450 (11) 11,100 (12)
-------- --------- ---------- -------- --------
Net income................... $ 14,636 (6) $ 10,124 (7) $ 441,241 (9) $ 52,416 (11) $ 1,343 (12)
-------- --------- ---------- -------- --------
-------- --------- ---------- -------- --------
Basic income (loss) per share(4):
Continuing operations........... $ .11 $ .62 $ (.44) $ .42 $ (.48) $ (1.19)
--------
--------
Discontinued operations......... .37 (.23) 19.43 2.02 .54
-------- --------- ---------- -------- --------
Net income...................... $ .48 $ .39 $ 18.99 $ 2.44 $ .06
-------- --------- ---------- -------- --------
-------- --------- ---------- -------- --------
Diluted income (loss) per share(4):
Continuing operations........... $ .10 $ .60 $ (.44) $ .40 $ (.48) $ (1.19)
--------
--------
Discontinued operations......... .36 (.23) 19.43 1.91 .54
-------- --------- ---------- -------- --------
Net income...................... $ .46 $ .37 $ 18.99 $ 2.31 $ .06
-------- --------- ---------- -------- --------
-------- --------- ---------- -------- --------
Weighted-average common shares
outstanding..................... 30,306 26,015 (8) 23,232 21,532 20,446 18,946
Ratio of earnings to fixed
charges......................... 1.51 7.09 1.78 1.55
Amount by which earnings were
insufficient to cover fixed
charges......................... $ 16,940 $ 36,070
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and
short-term investments, including
restricted cash equivalents..... $219,433 $ 281,416 $ 942,836 $692,368 $665,109
Working capital................... 180,739 240,399 596,319 556,637 510,438
Total assets...................... 462,417 378,424 1,067,424 868,409 968,280
Long-term debt.................... 279,226 3,792 291,718 288,955 352,700
Stockholders' equity
(deficit)(5)..................... 11,272 (166,726)(8) 282,310 (10) 332,397 332,742
4
HISTORICAL PRO FORMA
------------------------ ----------
THREE MONTHS ENDED(2)
----------------------------------------
MARCH 30,
MARCH 31, -------------------------
2002 2003(14) 2003
---- -------- ----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA(3):
Revenues:
Net sales................................................ $ -- $ 48,497 $ 48,497
Royalties and franchise and related fees................. 22,381 21,237 21,237
------- -------- ----------
22,381 69,734 69,734
------- -------- ----------
Costs and expenses:
Cost of sales, excluding depreciation and amortization... -- 36,255 36,255
Selling, general and administrative...................... 19,506 26,480 26,480
Depreciation and amortization, excluding amortization of
deferred financing costs................................ 1,581 3,383 3,383
------- -------- ----------
21,087 66,118 66,118
------- -------- ----------
Operating profit...................................... 1,294 3,616 3,616
Interest expense........................................... (6,360) (8,458) (10,885)
Insurance expense related to long-term debt................ (1,175) (1,092) (1,092)
Investment income, net..................................... 6,062 3,141 3,141
Other income (expense), net................................ (570) 557 557
------- -------- ----------
Loss before income taxes and minority interests....... (749) (2,236) (4,663)
(Provision for) benefit from income taxes.................. (297) 262 1,136
------- -------- ----------
Net loss.............................................. $(1,046) $ (1,974) $ (3,527)
------- -------- ----------
------- -------- ----------
Basic loss per share(4):................................... $ (.05) $ (.10) $ (.19)
------- -------- ----------
------- -------- ----------
Diluted loss per share(4):................................. $ (.05) $ (.10) $ (.19)
------- -------- ----------
------- -------- ----------
Weighted-average common shares outstanding................. 20,422 20,413 18,913
Amount by which earnings were insufficient to cover fixed
charges.................................................. $ 159 $ 2,813 $ 5,240
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short-term investments,
including restricted cash equivalents.................... $657,424 $ 784,024
Working capital............................................ 505,634 632,234
Total assets............................................... 952,885 1,086,185
Long-term debt............................................. 340,917 515,917
Stockholders' equity(5).................................... 332,691 290,991
5
NOTES TO SUMMARY FINANCIAL DATA
(1) Summary Consolidated Financial Data for the years ended on or prior to the
fiscal year ended December 31, 2000 reflect the discontinuance of our
beverage businesses sold in October 2000 and for the years ended on or
prior to the fiscal year ended January 2, 2000 reflect the discontinuance
of our propane business sold in July 1999.
(2) We report on a fiscal year basis consisting of 52 or 53 weeks ending on the
Sunday closest to December 31. In accordance with this method, our 1998
fiscal year contained 53 weeks and each of our 1999, 2000, 2001 and 2002
fiscal years contained 52 weeks. Each of our fiscal quarters ended March
31, 2002 and March 30, 2003 contained 13 weeks.
(3) Certain amounts included in the prior periods' Statement of Operations Data
have been reclassified to (a) retroactively reflect the adoption on
December 30, 2002 of Statement of Financial Accounting Standards No. 145
and (b) otherwise conform with the current period's presentation.
(4) Basic and diluted income (loss) per share are the same for the fiscal years
2000 and 2002 and for the fiscal quarters ended March 31, 2002 and March
30, 2003 since all potentially dilutive securities would have had an
antidilutive effect based on the loss from continuing operations for each
of those periods. The shares used in the calculation of diluted income
(loss) per share for the fiscal years 1998 (31,527,000), 1999 (26,943,000)
and 2001 (22,692,000) consist of the weighted average common shares
outstanding and potential common shares reflecting the effect of dilutive
stock options of 1,221,000, 818,000 and 1,160,000, respectively, and for
the fiscal year 1999 the effect of a dilutive forward purchase obligation
for common stock of 110,000 shares.
(5) We have not paid any dividends on our common shares during any of the
periods presented.
(6) Reflects certain significant credits recorded during fiscal 1998 as
follows: $7,074,000 credited to net income representing (1) $3,067,000
included in the income from operations of the discontinued businesses
consisting of $5,016,000 of gain on sale of businesses less $1,949,000 of
related income taxes and (2) $4,007,000 of gain on disposal of discontinued
operations.
(7) Reflects certain significant charges and credits recorded during fiscal
1999 as follows: $2,126,000 charged to operating profit representing a
capital structure reorganization related charge related to equitable
adjustments made to the terms of outstanding stock options for stock of a
former subsidiary held by corporate employees; $1,425,000 charged to income
from continuing operations before income taxes and minority interests
representing (1) the aforementioned $2,126,000 charged to operating profit
and (2) a $2,351,000 charge from the early extinguishment of debt, both
less $3,052,000 of reversal of excess interest expense accruals for
interest due the Internal Revenue Service, which we refer to as the 'IRS,'
in connection with the completion of their examinations of our Federal
income tax returns for prior years; $4,262,000 credited to income from
continuing operations representing $5,127,000 of release of excess reserves
for income taxes in connection with the completion of IRS examinations of
our Federal income tax returns less the aforementioned $1,425,000 charged
to income from continuing operations before income taxes and minority
interests plus $560,000 of related income tax benefit; and $3,897,000
credited to net income representing (1) the aforementioned $4,262,000
credited to income from continuing operations and (2) $15,102,000 of gain
on disposal of discontinued operations, both less $15,467,000 of charges
reported in loss from operations of the discontinued businesses consisting
of (a) a $16,757,000 charge from the early extinguishment of debt, (b) a
$3,348,000 capital structure reorganization related charge, similar to the
charge in continuing operations, relating to option holders who were
employees of the sold businesses, (c) $411,000 of provision for interest
due the IRS in connection with the completion of their examination of our
Federal income tax returns, all less $7,651,000 of related income tax
benefit and (d) $2,602,000 of provision for income taxes in connection with
the completion of IRS examinations of our Federal income tax returns.
6
(8) In fiscal 1999 we repurchased for treasury 3,805,015 shares of our Class A
common stock and 1,999,208 shares of our Class B common stock for an
aggregate $117,160,000 and recorded a forward purchase obligation for two
future purchases of Class B common stock that occurred on August 10, 2000
and on August 10, 2001 for $42,343,000 and $43,843,000, respectively. These
transactions resulted in a $203,346,000 reduction to stockholders' equity
in fiscal 1999 resulting in a stockholders' deficit as of January 2, 2000
and a reduction of 3,376,000 shares in the weighted-average common shares
outstanding.
(9) Reflects certain significant charges and credits recorded during fiscal
2000 as follows: $36,432,000 charged to operating profit and income from
continuing operations before income taxes and minority interests
representing (1) a $26,010,000 charge for capital market transaction
related compensation and (2) a $10,422,000 charge resulting from our
repurchase of 1,045,834 shares of our Class A common stock from certain of
our officers and a director within six months after exercise of the related
stock options by the officers and director included in selling, general and
administrative; $32,914,000 charged to loss from continuing operations
representing the aforementioned $36,432,000 less $3,518,000 of related
income tax benefit; and $427,352,000 credited to net income representing
$460,266,000 of the then estimated gain on disposal of our former beverage
businesses credited to income from discontinued operations, net of a
$20,680,000 after tax charge from the early extinguishment of debt, less
the aforementioned $32,914,000 charged to loss from continuing operations.
(10) The increase in stockholders' equity during fiscal 2000 principally
reflects net income of $441,241,000 which includes a gain on disposal of
discontinued operations of $460,266,000.
(11) Reflects certain significant credits recorded during fiscal 2001 as
follows: $5,000,000 credited to selling, general and administrative,
operating profit and income from continuing operations before income taxes
and minority interests representing the receipt of a $5,000,000 note
receivable from our Chairman and Chief Executive Officer and our President
and Chief Operating Officer received in connection with the settlement of a
class action lawsuit involving certain awards of compensation to those
executives; $3,200,000 credited to income from continuing operations
representing the aforementioned $5,000,000 less $1,800,000 of related
income tax expense; and $46,650,000 credited to net income representing the
aforementioned $3,200,000 credited to income from continuing operations and
$43,450,000 of additional gain on disposal of our beverage businesses.
(12) Reflects a significant credit recorded during fiscal 2002 as follows:
$11,100,000 credited to net income representing adjustments to the
previously recognized gain on disposal of our beverage businesses due to
the release of reserves for income taxes associated with the discontinued
beverage operations in connection with the receipt of related income tax
refunds.
(13) Reflects a significant charge in the fiscal 2002 pro forma data as follows:
$6,403,000 charged to selling, general and administrative, operating profit
and loss from continuing operations before income taxes and minority
interests representing expenses incurred by Sybra, Inc., which we acquired
on December 27, 2002, directly relating to its bankruptcy proceedings,
principally for legal fees and, to a much lesser extent, for other
professional fees; and $3,931,000 charged to loss from continuing
operations representing the aforementioned $6,403,000 less $2,472,000 of
related income tax benefit.
(14) Our consolidated results of operations for the three months ended March 30,
2003 include the results of Sybra, but our consolidated results for the
three months ended March 31, 2002 do not include the results of Sybra. Our
consolidated results of operations for the three months ended March 31,
2002 include royalties from Sybra of $1,736,000, but our consolidated
results of operations for the three months ended March 30, 2003 no longer
include royalties from Sybra.
7
THE OFFERING
Securities Offered................... $175,000,000 aggregate principal amount of 5% Convertible
Notes due 2023.
Maturity Date........................ May 15, 2023
Interest............................. 5% per annum on the principal amount, payable semi-annually
in arrears in cash on May 15 and November 15 of each year,
beginning November 15, 2003.
Ranking.............................. The notes are our general unsecured and unsubordinated
obligations and rank equally in right of payment with all of
our existing and future unsecured and unsubordinated
indebtedness. The notes rank junior to all of our existing
and future secured obligations to the extent of the value of
the collateral securing such obligations. As of March 30,
2003 we had total secured indebtedness of approximately $17.5
million. The notes are also effectively subordinated to all
liabilities of our subsidiaries. As of March 30, 2003 our
subsidiaries had total liabilities of approximately $440.8
million, not including contingent liabilities or intercompany
indebtedness.
Conversion........................... You may convert the notes into shares of our Class A common
stock at a conversion rate of 25 shares per $1,000 principal
amount of notes (equal to an initial conversion price of $40
per share), subject to adjustment, prior to the close of
business on the final maturity date, under any of the
following circumstances:
o during any fiscal quarter commencing after June 29,
2003, if the closing sale price of our Class A common
stock exceeds 120% of the conversion price for at least
20 trading days in the 30 consecutive trading days
ending on the last trading day of the preceding fiscal
quarter; or
o during the five business day period after any ten
consecutive trading day period in which the trading
price per $1,000 principal amount of notes for each day
of that period was less than 95% of the product of the
closing sale price of our Class A common stock and the
number of shares of Class A common stock issuable upon
conversion of $1,000 principal amount of notes; or
o if the notes have been called for redemption; or
o upon the occurrence of specified corporate events
described under 'Description of the Notes.'
Upon conversion, we will have the right to deliver, in lieu
of shares of our Class A common stock, cash or a combination
of cash and Class A common stock. If we elect to pay holders
cash for their notes, the payment will be based on the
applicable stock price (as defined in this prospectus).
Redemption........................... We may redeem any of the notes beginning May 20, 2010, by
giving you at least 30 days' but not more than 60 days'
notice. We may redeem the notes either in whole or in part at
a redemption price of 100% of their principal amount, plus
accrued and unpaid interest.
Fundamental Change................... If a fundamental change (as described under 'Description of
the Notes -- Redemption at Option of the Holder Upon a
8
Fundamental Change') occurs prior to maturity, you may
require us to purchase all or part of your notes at a
redemption price equal to 100% of their principal amount,
plus accrued and unpaid interest. We may elect to pay all or
a portion of the purchase price in Class A common stock
instead of cash, subject to certain conditions.
Repurchase at Option of the Holder... You may require us to repurchase the notes on May 15 of 2010,
2015 and 2020 at a repurchase price equal to 100% of their
principal amount, plus accrued and unpaid interest. We may
also add additional dates on which you may require us to
repurchase all or a portion of your notes, however we are not
obligated to do so. See 'Description of the
Notes -- Repurchase at Option of the Holder.'
Use of Proceeds...................... The selling securityholders will receive all of the net
proceeds from the sale of the notes and our Class A common
stock issuable upon conversion of the notes. We will not
receive any of the proceeds from the sale of any of these
securities.
Registration Rights.................. Pursuant to a registration rights agreement, we have agreed
to use reasonable efforts to keep the shelf registration
statement, of which this prospectus is a part, effective
until either of the following has occurred:
o all securities covered by the registration statement
have been sold; or
o the expiration of the applicable holding period with
respect to the notes and the underlying Class A common
stock under Rule 144(k) under the Securities Act, or any
successor provision.
See 'Description of the Notes -- Registration Rights of the
Noteholders.'
New York Stock Exchange Symbol for
the Class A Common Stock........... TRY.
9
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones we face.
Additional risks not presently known to us or that we currently deem immaterial
may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of the
notes and our Class A common stock could decline due to any of these risks, and
you may lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
RISKS RELATED TO OUR COMPANY
A SUBSTANTIAL AMOUNT OF OUR SHARES OF CLASS A COMMON STOCK ARE CONCENTRATED
IN THE HANDS OF CERTAIN STOCKHOLDERS.
DWG Acquisition Group, L.P. owns directly or indirectly approximately 25.5%
of our outstanding Class A common stock as of May 9, 2003. Messrs. Peltz and
May, as the sole general partners of DWG Acquisition, beneficially own all of
the Class A common stock owned by DWG Acquisition. In addition, Messrs. Peltz
and May each individually beneficially own certain additional shares of Class A
common stock which, when combined with the shares owned through DWG Acquisition,
collectively constituted approximately 38.4% of our Class A common stock as of
May 31, 2003. As a result of such ownership, Messrs. Peltz and May are able to
exercise significant influence over the election of members of our boards of
directors and may also be able to influence significantly the outcome of certain
corporate actions requiring stockholder approval, including mergers,
consolidations and the sale of all or substantially all of our assets, and may
be in a position to prevent or cause a change in control of us.
OUR SUCCESS DEPENDS SUBSTANTIALLY UPON THE CONTINUED RETENTION OF CERTAIN
KEY PERSONNEL.
We believe that our success has been and will continue to be dependent to a
significant extent upon the efforts and abilities of our senior management team.
The failure by us to retain members of our senior management team could
adversely affect our ability to build on the efforts undertaken by its current
management to increase the efficiency and profitability of its businesses.
Specifically, the loss of Nelson Peltz, our Chairman and Chief Executive
Officer, or Peter May, our President and Chief Operating Officer, other senior
members of our senior management or the senior management of our subsidiaries
could adversely affect us.
WE HAVE BROAD DISCRETION IN THE USE OF OUR SIGNIFICANT CASH, CASH
EQUIVALENTS AND INVESTMENT POSITION.
At March 30, 2003, after giving effect to the initial offering of the notes
and the application of the net proceeds therefrom, we had approximately $784
million of cash, cash equivalents and short term investments, including
restricted cash equivalents. We have not designated any specific use for our
significant cash, cash equivalents and investment position. We are evaluating
options for the use of these funds, including working capital, repayment of
indebtedness, acquisitions, additional share repurchases and investments.
Acquisitions are a key element of our business strategy, but we cannot
assure you that we will be able to identify appropriate acquisition targets in
the future and that we will be able to successfully integrate any future
acquisitions into our existing operations.
Acquisitions involve numerous risks, including difficulties assimilating new
operations and products. In addition, acquisitions may require significant
management time and capital resources. We cannot assure you that we will have
access to the capital required to finance potential
10
acquisitions on satisfactory terms, that any acquisition would result in
long-term benefits to us or that management would be able to manage effectively
the resulting business. Future acquisitions are likely to result in the
incurrence of additional indebtedness or the issuance of additional equity
securities.
WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE SO AS NOT TO BE
DEEMED AN 'INVESTMENT COMPANY.'
The Investment Company Act of 1940, as amended (the '1940 Act'), requires
the registration of, and imposes various restrictions on, companies that do not
meet certain financial tests regarding the composition of their assets and
source of income. A company may be deemed to be an investment company if it owns
'investment securities' with a value exceeding 40% of its total assets
(excluding government securities and cash items) on an unconsolidated basis or
if more than 45% of the value of its total assets consists of, or more than 45%
of its net after-tax income/loss is derived from, securities of companies it
does not control. Our acquisition strategy may require us to take actions that
we would not otherwise take so as not to be deemed an 'investment company' under
the 1940 Act. Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or safe harbor
provision applies. Presently, the total amount of investment securities that we
hold is substantially less than 40% of our total assets and substantially less
than 45% of our total assets consist of, and substantially less than 45% of our
net after-tax income/loss is derived from, securities of companies we do not
control. If in the future we were to be deemed an investment company, we would
become subject to the requirements of the 1940 Act. We intend to make
acquisitions and other investments in a manner so as not to be deemed an
investment company. As a result, we may forego investments that we might
otherwise make or retain or dispose of investments or assets that we might
otherwise sell or hold.
IN THE FUTURE WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE
SO AS NOT TO BE SUBJECT TO TAX AS A 'PERSONAL HOLDING COMPANY.'
If at any time during the last half of our taxable year, five or fewer
individuals own or are deemed to own more than 50% of the total value of our
shares and if during such taxable year we receive 60% or more of our gross
income from specified passive sources, we would be classified as a 'personal
holding company' for the U.S. federal income tax purposes. If this were the
case, we would be subject to additional taxes at the rate of 15% on a portion of
our income, to the extent this income is not distributed to shareholders. We do
not currently expect to have any liability for tax under the personal holding
company rules in 2003. However, we cannot assure you that we will not become
liable for such tax in the future. Because we do not wish to be classified as a
personal holding company or to incur any personal holding company tax, we may be
required in the future to take actions that we would not otherwise take. These
actions may influence our strategic and business decisions, including causing us
to conduct our business and acquire or dispose of investments differently than
we otherwise would.
OUR SUBSIDIARIES ARE SUBJECT TO VARIOUS RESTRICTIONS, AND SUBSTANTIALLY ALL
OF THEIR ASSETS ARE PLEDGED UNDER CERTAIN DEBT AGREEMENTS.
Under our subsidiaries' debt agreements, substantially all of our
subsidiaries' assets, other than cash, cash equivalents and short-term
investments, are pledged as collateral security. The indenture relating to the
notes issued in the Arby's securitization and the agreements relating to debt
issued by Sybra contain financial covenants that, among other things, require
Arby's Franchise Trust (the borrower in the Arby's securitization) and Sybra, as
applicable, to maintain certain financial ratios and restrict their ability to
incur debt, enter into certain fundamental transactions (including sales of all
or substantially all of their assets and certain mergers and consolidations) and
create or permit liens. If either Arby's Franchise Trust or Sybra is unable to
generate sufficient cash flow or otherwise obtain the funds necessary to make
required payments of interest or principal under, or is unable to comply with
covenants of, its respective debt agreements, it would be in default under
11
the terms of such agreements which would, under certain circumstances, permit
the insurer of the notes issued in the Arby's securitization or the lenders to
Sybra, as applicable, to accelerate the maturity of the balance of its
indebtedness.
ARBY'S IS DEPENDENT ON RESTAURANT REVENUES AND OPENINGS.
Franchise royalties and fees comprise a significant portion of our revenues
and earnings and the results of our restaurant business are highly dependent on
the gross revenues of Arby's franchisees' restaurants. Additionally, as a result
of the acquisition of Sybra, we derive revenues and earnings from restaurant
operations. Accordingly, the number of Arby's restaurants that we and Arby's
franchisees operate is important to us. It is possible that interruptions in the
distribution of supplies to Arby's restaurants could adversely affect sales at
company-owned restaurants and result in a decline in royalty fees that we
receive from Arby's franchisees.
THE NUMBER OF ARBY'S RESTAURANTS THAT OPEN MAY NOT MEET EXPECTATIONS.
Numerous factors beyond our control affect restaurant openings. These
factors include the ability of potential restaurant owners to obtain financing,
locate appropriate sites for restaurants and obtain all necessary state and
local construction, occupancy and other permits and approvals. Although as of
March 30, 2003 franchisees had signed commitments to open approximately 550
Arby's restaurants and have made or are required to make non-refundable deposits
of $10,000 per restaurant, we cannot assure you that these commitments will
result in open restaurants. In addition, we cannot assure you that our
franchisees will successfully develop and operate their restaurants in a manner
consistent with our standards.
ARBY'S FRANCHISE REVENUES DEPEND, TO A SIGNIFICANT EXTENT, ON ITS LARGEST
FRANCHISEE AND A DECLINE IN ITS REVENUE MAY INDIRECTLY ADVERSELY AFFECT US.
During 2002, Arby's received approximately 27% of its royalties and
franchise and related fees from RTM Restaurant Group, Inc. ('RTM') (which as of
March 30, 2003, operated 786 Arby's restaurants). Arby's revenues could
materially decline from their present levels if RTM suffered a significant
decline in its business.
COMPETITION FROM RESTAURANT COMPANIES COULD ADVERSELY AFFECT US.
The business sectors in which owned and franchised Arby's restaurants
compete are highly competitive with respect to, among other things, price, food
quality and presentation, service, location, and the nature and condition of the
financed business unit/location, and are affected by changes in tastes and
eating habits, local, regional and national economic conditions and population
and traffic patterns. Arby's restaurants compete with a variety of locally-owned
restaurants, as well as competitive regional and national chains and franchises.
Moreover, new companies may enter our market areas and target our sales
audience. Such competition may have, among other things, lower operating costs,
lower debt service requirements, better locations, better facilities, better
management, more effective marketing and more efficient operations. All such
competition may adversely affect our revenues and profits and those of our owned
and franchised restaurants and could adversely affect the ability of our
franchisees to make franchise payments to us. Furthermore, we and our
franchisees face competition for competent employees and high levels of employee
turnover, which also can have an adverse effect on our operations and revenues
and those of our franchisees as well as on our franchisees' abilities to make
franchise payments to us. Many of Arby's competitors have substantially greater
financial, marketing, personnel and other resources than Arby's which may give
them a competitive advantage. Accordingly, we cannot assure you that the level
of gross revenues of company-owned restaurants and of restaurants owned by
Arby's franchisees, upon which our royalty fees are dependent, will continue.
12
CHANGES IN CONSUMER TASTES AND PREFERENCES AND IN SPENDING AND DEMOGRAPHIC
PATTERNS, AS WELL AS HEALTH AND SAFETY CONCERNS ABOUT FOOD QUALITY, COULD RESULT
IN A LOSS OF CUSTOMERS AND REDUCE THE ROYALTIES THAT WE RECEIVE.
The quick service restaurant industry is often affected by changes in
consumer tastes, national, regional and local economic conditions, discretionary
spending priorities, demographic trends, traffic patterns and the type, number
and location of competing restaurants. Consumer preferences could also be
affected by health or safety concerns with respect to the consumption of beef,
french fries or other foods or with respect to the effects of food borne
illnesses. As is generally the case in the restaurant franchise business, we and
our franchisees may, from time to time, be the subject of complaints or
litigation from customers alleging illness, injury or other food quality, health
or operational concerns. Adverse publicity resulting from these allegations may
harm the reputation of Arby's restaurants, even if the allegations are not
valid, we are not found liable or those concerns relate only to a single
restaurant or a limited number of restaurants. Moreover, complaints, litigation
or adverse publicity experienced by one or more of our franchisees could also
adversely affect our business as a whole. If our owned and franchised
restaurants are unable to adapt to changes in consumer preferences and trends,
or we have adverse publicity due to any of these concerns, we and our
franchisees may lose customers and the resulting revenues from company-owned
restaurants and the royalties that Arby's receives from its franchisees may
decline.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WHICH
COULD HARM THE VALUE OF OUR BRANDS AND ADVERSELY AFFECT OUR BUSINESS.
Our intellectual property is material to the conduct of our business. We
rely on a combination of trademarks, copyrights, service marks, trade secrets
and similar intellectual property rights to protect our brands and other
intellectual property. The success of our business strategy depends, in part, on
our continued ability to use our existing trademarks and service marks in order
to increase brand awareness and further develop our branded products in both
domestic and international markets. If our efforts to protect our intellectual
property are not adequate, or if any third party misappropriates or infringes on
our intellectual property, either in print or on the Internet, the value of our
brands may be harmed, which could have a material adverse effect on our
business, including the failure of our brands to achieve and maintain market
acceptance.
We franchise our restaurant brands to various franchisees. While we try to
ensure that the quality of our brands is maintained by all of our franchisees,
we cannot assure you that these franchisees will not take actions that adversely
affect the value of our intellectual property or the reputation of the Arby's
restaurant system. We have registered certain trademarks and have other
trademark registrations pending in the U.S. and certain foreign jurisdictions.
The trademarks that we currently use have not been registered in all of the
countries outside of the United States in which we do business and may never be
registered in all of these countries.
We cannot assure you that all of the steps we have taken to protect our
intellectual property in the U.S. and foreign countries will be adequate. In
addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as the laws of the U.S.
WE, AND SOME OF OUR SUBSIDIARIES, REMAIN CONTINGENTLY LIABLE WITH RESPECT TO
CERTAIN OBLIGATIONS RELATING TO BUSINESSES THAT WE HAVE SOLD.
In 1997 we sold all of our then company-owned Arby's restaurants to
subsidiaries of RTM, Arby's largest franchisee. In connection with the sale, an
aggregate of approximately $54.7 million of mortgage and equipment notes were
assumed by subsidiaries of RTM, of which approximately $41 million remained
outstanding at March 30, 2003. RTM has guaranteed the payment of these notes by
its subsidiaries. Notwithstanding the assumption of this debt and guaranty, we
remain contingently liable as a guarantor of the notes. In addition, the
subsidiaries of RTM also assumed substantially all of the lease obligations
relating to the purchased restaurants (which aggregate a maximum of
approximately $66.0 million at March 30, 2003) and RTM has indemnified us for
any losses we might incur with respect to such leases. Notwithstanding such
assumption, Arby's and its
13
subsidiaries remain contingently liable if RTM's subsidiaries fail to make the
required payments under those notes and leases.
In addition, in July 1999, we sold 41.7% of our then remaining 42.7%
interest in National Propane Partners, L.P. and a sub-partnership, National
Propane, L.P. to Columbia Energy Group, and retained less than a 1% special
limited partner interest in AmeriGas Eagle Propane, L.P. (formerly known as
National Propane, L.P. and as Columbia Propane, L.P.). As part of the
transaction, our subsidiary, National Propane Corporation, agreed that while it
remains a special limited partner of AmeriGas, it would indemnify the owner of
AmeriGas for any payments the owner makes under certain debt of AmeriGas
(aggregating approximately $138.0 million as of March 30, 2003), if AmeriGas is
unable to repay or refinance such debt, but only after recourse to the assets of
AmeriGas. Either National Propane Corporation or AmeriGas Propane, L.P., the
owner of AmeriGas, may require AmeriGas to repurchase the special limited
partner interest. However, we believe it is unlikely that either party would
require repurchase prior to 2009 as either AmeriGas Propane, L.P. would owe us
tax indemnification payments or we would accelerate payment of deferred taxes,
which amount to approximately $42.4 million as of March 30, 2003, associated
with our sale of the propane business.
Although we believe that it is unlikely that we will be called upon to make
any payments under the guaranty, leases or indemnification described above, if
we were required to make such payments it could have a material adverse effect
on our financial position and results of operations.
CHANGES IN GOVERNMENTAL REGULATION MAY ADVERSELY AFFECT OUR ABILITY TO OPEN
NEW RESTAURANTS OR OTHERWISE ADVERSELY AFFECT OUR EXISTING AND FUTURE OPERATIONS
AND RESULTS.
Each Arby's restaurant is subject to licensing and regulation by health,
sanitation, safety and other agencies in the state and/or municipality in which
the restaurant is located. There can be no assurance that we, or our
franchisees, will not experience material difficulties or failures in obtaining
the necessary licenses or approvals for new restaurants which could delay the
opening of such restaurants in the future. In addition, more stringent and
varied requirements of local and tax governmental bodies with respect to zoning,
land use and environmental factors could delay or prevent development of new
restaurants in particular locations. We, and our franchisees, are also subject
to the Fair Labor Standards Act which governs such matters as minimum wages,
overtime and other working conditions, along with the Americans with
Disabilities Act, family leave mandates and a variety of other laws enacted by
the states that govern these and other employment law matters. We cannot predict
the amount of future expenditures which may be required in order to permit our
company owned restaurants to comply with any changes in existing regulations or
to comply with any future regulations that may become applicable to our
business.
Certain of our current and past operations are or have been subject to
federal, state and local environmental laws and regulations concerning the
discharge, storage, handling and disposal of hazardous or toxic substances. Such
laws and regulations provide for significant fines, penalties and liabilities,
in certain cases without regard to whether the owner or operator of the property
knew of, or was responsible for, the release or presence of such hazardous or
toxic substances. In addition, third parties may make claims against owners or
operators of properties for personal injuries and property damage associated
with releases of hazardous or toxic substances. Although we believe that our
operations comply in all material respects with all applicable environmental
laws and regulations, we cannot predict what environmental legislation or
regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. We cannot predict the amount of
future expenditures which may be required in order to comply with any
environmental laws or regulations or to satisfy any such claims.
14
OUR CERTIFICATE OF INCORPORATION CONTAINS CERTAIN ANTI-TAKEOVER PROVISIONS
AND PERMITS OUR BOARD OF DIRECTORS TO ISSUE PREFERRED STOCK AND CLASS B COMMON
STOCK WITHOUT SHAREHOLDER APPROVAL.
Certain provisions in our certificate of incorporation are intended to
discourage or delay a hostile takeover of control of us. These are summarized in
detail under the caption 'Description of Our Capital Stock -- Certain
Anti-Takeover Provisions.'
Our certificate of incorporation, authorizes the issuance of shares of
'blank check' preferred stock and Class B common stock, each of which will have
such designations, rights and preferences as may be determined from time to time
by our board of directors. Accordingly, our board of directors is empowered,
without stockholder approval, to issue preferred stock and Class B common stock
with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power and other rights of the holders of our Class A
common stock. The preferred stock and Class B common stock could be used to
discourage, delay or prevent a change in control of us which is determined by
our board of directors to be undesirable. Although we have no present intention
to issue any shares of preferred stock or Class B common stock, we cannot assure
you that we will not do so in the future.
RISKS RELATING TO THE NOTES AND OUR CLASS A COMMON STOCK
WE ARE A HOLDING COMPANY AND DEPEND ON DIVIDENDS OF AND DISTRIBUTIONS FROM
OUR SUBSIDIARIES AND OUR CASH OR CASH EQUIVALENTS TO MEET OUR OBLIGATIONS,
INCLUDING OUR OBLIGATIONS UNDER THE NOTES.
Because we are a holding company, our ability to service debt, including the
notes, and pay dividends, including dividends on our Class A common stock, is
dependent upon, our cash, cash equivalents and short-term investments on hand,
cash flows from our subsidiaries, including loans, cash dividends and
reimbursement by subsidiaries to us in connection with providing certain
management services and payments by subsidiaries under certain tax sharing
agreements. Before giving effect to the initial issuance of the notes, the cash
flow from our subsidiaries is inadequate to cover all of the expenses of our
holding company. Accordingly, we will need to use our cash and cash equivalents
or income from other investments we may make to pay interest and principal on
the notes.
Under the terms of the indenture relating to the notes issued in the Arby's
securitization and the agreements relating to debt issued by Sybra, there are
restrictions on the ability of certain of our subsidiaries to pay dividends
and/or make loans or advances to us. The ability of any of our subsidiaries to
pay cash dividends and/or make loans or advances to us is also dependent upon
the respective abilities of such entities to achieve sufficient cash flows after
satisfying their respective cash requirements, including debt service, to enable
the payment of such dividends or the making of such loans or advances. In
addition, in connection with the December 2002 acquisition of Sybra, we agreed
that Sybra would not pay dividends to us for a period of two years from the
closing.
THE NOTES ARE STRUCTURALLY SUBORDINATED TO ALL EXISTING AND FUTURE
LIABILITIES OF OUR SUBSIDIARIES.
The notes are not obligations of our subsidiaries, and our subsidiaries have
no obligation to pay any amounts due on the notes. All amounts due on the notes
will be structurally subordinated to all obligations and liabilities of our
subsidiaries. As of March 30, 2003, our subsidiaries had total liabilities of
approximately $440.8 million, not including contingent liabilities or
intercompany indebtedness. The indenture relating to the notes does not limit
our ability or the ability of our subsidiaries to issue or incur additional debt
or preferred stock.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
There is currently no public market for the notes and no active trading
market might ever develop. The notes may trade at a discount from their
principal amount at maturity, depending on
15
prevailing interest rates, the market for similar securities, the price of our
shares of Class A common stock, our performance and other factors.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE
FUNDAMENTAL CHANGE REPURCHASE OPTION OR THE REPURCHASE AT THE OPTION OF THE
HOLDER PROVISION IN THE NOTES.
Upon the occurrence of specific kinds of fundamental change events and on
the May 15, 2010, 2015 and 2020 purchase dates, we may be required to repurchase
all outstanding notes. However, it is possible that we will not have sufficient
funds at such time to make the required repurchase of notes in cash or that
restrictions in our debt instruments will not allow such repurchases. Under the
notes, we may pay the purchase price described above in the case of a
fundamental change, in shares of Class A common stock. Our Class A common stock
no longer being publicly traded would constitute a 'fundamental change' under
the indenture governing the notes.
THE HOLDERS OF OUR CLASS A COMMON STOCK MAY EXPERIENCE A DILUTION IN THE
VALUE OF THEIR EQUITY INTEREST AS A RESULT OF THE ISSUANCE AND SALE OF
ADDITIONAL SHARES OF OUR CLASS A COMMON STOCK.
We may decide to raise additional funds through public or private debt or
equity financing to fund our operations. If we raise funds by issuing equity
securities, the percentage ownership of current securityholders will be reduced
and the new equity securities may have rights senior to those of the Class A
common stock issuable upon conversion of the notes. This dilution could be
significant depending upon the type of financing obtained and the terms of such
financing.
SHARES OF OUR CLASS A COMMON STOCK ELIGIBLE FOR PUBLIC SALE COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR CLASS A COMMON STOCK.
The market price of our Class A common stock could decline as a result of
sales of a large number of shares in the market in the future or market
perception that such sales could occur, including sales or distributions of
shares by one or more of our large stockholders or by our controlling
stockholder. These factors could also make it more difficult for us to raise
funds through offerings of equity securities in the future at a time and at a
price that we deem appropriate. As of May 31, 2003 there were 19,104,724 shares
of our Class A common stock outstanding. All of the shares of Class A common
stock are freely transferable without restriction or further registration under
the federal securities laws, except for any shares held by our affiliates, sales
of which will be limited by Rule 144 under the Securities Act. We and our
executive officers and directors and an affiliate have agreed that, subject to
certain exceptions, we and they will not offer for sale, sell, contract to sell
or otherwise dispose of, directly or indirectly, any shares of our Class A
common stock (or any option, warrant or other security convertible into or
exchangeable or exercisable for Class A common stock) or consent to those
transactions until August 12, 2003 without the prior written consent of the
initial purchaser. At any time following the expiration or termination of such
period, these shareholders may sell such shares subject to compliance with
applicable federal and state securities laws.
WE HAVE A SUBSTANTIAL AMOUNT OF STOCK OPTIONS EXERCISABLE INTO OUR CLASS A
COMMON STOCK OUTSTANDING.
As of March 30, 2003 we had granted options to purchase shares of our Class
A common stock aggregating approximately 9.2 million shares under our equity
participation plans to our directors, officers, key employees and consultants
and had approximately 5.4 million shares available for future grant. The
exercise of outstanding options or the future issuance of options (and the
exercise of such options) or restricted stock will dilute the beneficial
ownership of holders of our Class A common stock.
16
THE PRICE OF OUR CLASS A COMMON STOCK, AND THEREFORE OF THE NOTES, MAY
FLUCTUATE SIGNIFICANTLY, WHICH MAY MAKE IT DIFFICULT FOR YOU TO RESELL THE
NOTES, OR CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, WHEN YOU
WISH OR AT PRICES YOU FIND ATTRACTIVE.
The price of our Class A common stock on the New York Stock Exchange
constantly changes. We expect that the market price of our Class A common stock
will continue to fluctuate. Because the notes are convertible into our Class A
common stock, volatility or depressed prices for our Class A common stock could
have a similar effect on the trading price of the notes. Holders who have
received Class A common stock upon conversion will also be subject to the risk
of volatility and depressed prices.
Our stock price can fluctuate as a result of a variety of factors, many of
which are beyond our control. These factors include:
o significant acquisitions or business combinations, strategic
partnerships, joint ventures or capital commitments by or
involving us or our competitors;
o failure to integrate our acquisitions or realize anticipated
benefits from our acquisitions;
o competition, including pricing pressures, the potential
impact of competitors' new units on sales by Arby's
restaurants and consumers' perceptions of the relative
quality, variety and value of the food products offered;
o market acceptance of new product offerings;
o new product and concept development by competitors;
o changing trends in consumer tastes and preferences
(including changes resulting from health or safety concerns
with respect to the consumption of beef, french fries or
other foods or the effects of food-borne illnesses) and in
spending and demographic patterns;
o the ability of franchisees to open new restaurants in
accordance with their development commitments, including the
ability of franchisees to finance restaurant development;
o delays in opening new restaurants or completing remodels;
o anticipated and unanticipated restaurant closures by us and
our franchisees;
o availability of qualified personnel to us and to our
franchisees;
o changes in government regulations;
o changes in applicable accounting policies and practices; and
o geopolitical conditions such as acts or threats of terrorism
or military conflicts.
General market fluctuations, industry factors and economic conditions, such
as economic slowdowns, recessions or interest rate changes, also could cause our
stock price to fluctuate. See 'Forward-Looking Statements.'
In addition, the stock market in general has experienced extreme volatility
that has often been unrelated to the operating performance of a particular
company. These broad market fluctuations may adversely affect the market price
of our Class A common stock.
THE NOTES DO NOT RESTRICT OUR ABILITY TO INCUR ADDITIONAL DEBT OR TO TAKE
OTHER ACTIONS THAT COULD NEGATIVELY IMPACT HOLDERS OF THE NOTES.
We are not restricted under the terms of the notes from incurring additional
indebtedness, including secured debt. In addition, the limited covenants
applicable to the notes do not require us to achieve or maintain any minimum
financial results relating to our financial position or results of operations.
Our ability to recapitalize, incur additional debt and take a number of other
actions that are not limited by the terms of the notes could have the effect of
diminishing our ability to make payments on the notes when due.
17
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus or incorporated by
reference into this prospectus are 'forward-looking statements' that involve
risks, uncertainties and assumptions with respect to us, including some
statements concerning the transactions described in this prospectus, future
results, plans, goals and other events which have not yet occurred. These
statements are intended to qualify for the safe harbors from liability provided
by Section 27A of the Securities Act and Section 21E of the Exchange Act. You
can find many (but not all) of these statements by looking for words like
'will,' 'may,' 'believes,' 'expects,' 'anticipates,' 'forecast,' 'future,'
'intends,' 'plans' and 'estimates' and for similar expressions.
These forward-looking statements are based on our current expectations,
speak only as of the date of this prospectus and are susceptible to a number of
risks, uncertainties and other factors. Our actual results, performance and
achievements may differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. For those
statements, we claim the protection of the safe-harbor for forward-looking
statements contained in the Securities Litigation Reform Act of 1995. Many
important factors could affect our future results and could cause those results
to differ materially from those expressed in the forward-looking statements
contained in this prospectus. Such factors include, but are not limited to, the
following:
o Competition, including pricing pressures, the potential
impact of competitors' new units on sales by Arby's
restaurants and consumers' perceptions of the relative
quality, variety and value of the food products offered;
o Success of operating initiatives;
o Development and operating costs;
o Advertising and promotional efforts;
o Brand awareness;
o The existence or absence of positive or adverse publicity;
o Market acceptance of new product offerings;
o New product and concept development by competitors;
o Changing trends in consumer tastes and preferences
(including changes resulting from health or safety concerns
with respect to the consumption of beef, french fries or
other foods or the effects of food-borne illnesses) and in
spending and demographic patterns;
o The business and financial viability of key franchisees;
o Availability, location and terms of sites for restaurant
development by us and our franchisees;
o The ability of franchisees to open new restaurants in
accordance with their development commitments, including the
ability of franchisees to finance restaurant development;
o Delays in opening new restaurants or completing remodels;
o Anticipated and unanticipated restaurant closures by us and
our franchisees;
o The ability to identify, attract and retain potential
franchisees with sufficient experience and financial
resources to develop and operate Arby's restaurants;
o Changes in business strategy or development plans;
o Quality of our and our franchisees' management;
o Availability, terms and deployment of capital;
o Business abilities and judgment of our and our franchisees'
personnel;
o Availability of qualified personnel to us and to our
franchisees;
o Labor and employee benefit costs;
o Availability and cost of energy, raw materials, ingredients
and supplies;
18
o The potential impact that interruptions in the distribution
of supplies of food and other products to Arby's restaurants
could have on sales at our restaurants and the royalties
that we receive from franchisees;
o Availability and cost of workers' compensation and general
liability premiums and claims experience;
o Changes in national, regional and local economic, business
or political conditions in the countries and other
territories in which we and our franchisees operate;
o Changes in government regulations, including franchising
laws, accounting standards, environmental laws, minimum wage
rates and taxation requirements;
o Changes in applicable accounting policies and practices;
o The costs, uncertainties and other effects of legal,
environmental and administrative proceedings;
o The impact of general economic conditions on consumer
spending, including a slower consumer economy, and the
effects of war or terrorist activities;
o Adverse weather conditions; and
o Other risks and uncertainties referred to in this prospectus
and in our other current and periodic filings with the SEC,
all of which are difficult or impossible to predict
accurately and many of which are beyond our control.
We will not undertake and specifically decline any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. In
addition, it is our policy generally not to make any specific projections as to
future earnings, and we do not endorse any projections regarding future
performance that may be made by third parties.
19
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges or the
amounts by which our earnings were insufficient to cover fixed charges for the
periods indicated:
HISTORICAL PRO FORMA
--------------------------------------------------------------- ---------
YEAR ENDED
---------------------------------------------------------------------------
DECEMBER 29,
JANUARY 3, JANUARY 2, DECEMBER 31, DECEMBER 30, -------------------
1999 2000 2000 2001 2002 2002
---- ---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT RATIOS)
Ratio of earnings to fixed
charges................... 1.51 7.09 1.78 1.55
---- ---- ---- ----
---- ---- ---- ----
Amount by which earnings
were insufficient to cover
fixed charges............. $16,940 $36,070
------- -------
------- -------
The following table sets forth the amounts by which our earnings were
insufficient to cover fixed charges for the periods indicated:
HISTORICAL PRO FORMA
--------------------------- ---------
THREE MONTHS ENDED
------------------------------------------------
MARCH 30,
MARCH 31, ---------------------------
2002 2003 2003
---- ---- ----
(IN THOUSANDS)
$159 $2,813 $5,240
---- ------ ------
---- ------ ------
The ratio of earnings to fixed charges is computed by dividing fixed charges
into income (loss) from continuing operations before income taxes and minority
interests, as adjusted, plus fixed charges. Income (loss) from continuing
operations before income taxes and minority interests has been adjusted to
exclude equity in earnings (losses) of equity investees and to include any
distributions of earnings from equity investees. Fixed charges consist of
(i) interest on all indebtedness, including amortization of deferred financing
costs and original issue discount relating to outstanding long-term debt, and
(ii) the interest component of rental payments, which is deemed for this purpose
to be approximately one-third of rent expense.
USE OF PROCEEDS
The selling securityholders will receive all of the net proceeds from the
sale of the notes and our Class A common stock issuable upon conversion of the
notes. We will not receive any of the proceeds from the sale of any of these
securities.
20
PRICE RANGE OF COMMON STOCK
Our Class A common stock is traded on the NYSE under the ticker symbol
'TRY.' The high and low of our Class A common stock sales prices for the periods
indicated were as follows:
HIGH LOW
------ ------
FISCAL 2003
First Quarter........................................... $28.09 $25.16
Second Quarter (through June 18, 2003).................. $29.87 $26.27
FISCAL 2002
First Quarter........................................... $28.68 $24.00
Second Quarter.......................................... $28.73 $26.50
Third Quarter........................................... $27.55 $22.30
Fourth Quarter.......................................... $28.05 $21.98
FISCAL 2001
First Quarter........................................... $26.62 $23.44
Second Quarter.......................................... $26.40 $23.85
Third Quarter........................................... $26.50 $21.80
Fourth Quarter.......................................... $25.10 $22.40
As of June 1, 2003, there were approximately 3,555 holders of record of our
Class A common stock, including nominees for an indeterminate number of
beneficial owners.
DIVIDEND POLICY
We did not pay any dividends on our Class A common stock in 2001, 2002 or in
2003 as of the date of this prospectus. The declaration of future dividends is
subject to the discretion of our board of directors, which may from time to time
review whether to declare dividends in light of all of the then existing
relevant facts and circumstances.
In addition, under the terms of the indenture relating to the indebtedness
issued in the Arby's securitization and the agreements relating to debt issued
by Sybra, there are restrictions on the ability of certain of our subsidiaries
to pay dividends or advances to us. The ability of any of our subsidiaries to
pay cash dividends or advances to us is also dependent upon the respective
abilities of such entities to achieve sufficient cash flows after satisfying
their respective cash requirements, including debt service, to enable the
payment of such dividends or the making of such loans or advances. See 'Risk
Factors -- Risks Relating to the Notes and Our Class A Common Stock -- We are a
holding company and depend on dividends of and distributions from our
subsidiaries and our cash and cash equivalents to meet our obligations,
including our obligations under the notes.'
21
CAPITALIZATION
The following table sets forth at March 30, 2003:
o our unaudited historical consolidated capitalization; and
o our as adjusted capitalization which gives effect to the issuance of
the $175.0 million of Notes, the receipt of net proceeds of $168.3
million, net of $6.7 million of related estimated fees and expenses,
and the effect of the repurchase of 1.5 million shares of our class A
common stock for $41.7 million from the proceeds of the Notes.
The historical financial data as of March 30, 2003 in the following table
are derived from our unaudited condensed consolidated financial statements
included in our Quarterly Report on Form 10-Q for the quarter ended March 30,
2003, which is incorporated by reference in this prospectus. You should read all
of this information in conjunction with those condensed consolidated financial
statements and other financial information included in or incorporated by
reference in this prospectus.
MARCH 30, 2003
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
Cash, cash equivalents and short-term investments, including
restricted cash equivalents (a)........................... $657,424 $784,024
-------- --------
-------- --------
Current portion of long-term debt........................... $ 38,037 $ 38,037
-------- --------
Non-current portion of long-term debt:
7.44% insured securitization notes having expected
repayments through 2011, net of unamortized original
issue discount of $29,000............................. 228,700 228,700
Leasehold notes due through 2021........................ 74,625 74,625
Secured bank term loan due through 2008................. 14,253 14,253
8.95% secured promissory note due through 2006.......... 10,969 10,969
Equipment notes due through 2009........................ 4,712 4,712
Mortgage notes due through 2018......................... 3,174 3,174
Mortgage and equipment notes related to restaurants sold
in 1997 due through 2016.............................. 2,436 2,436
Capitalized lease obligations........................... 1,642 1,642
5% Convertible Notes due 2023........................... -- 175,000
Other................................................... 406 406
-------- --------
Total non-current portion of long-term debt......... 340,917 515,917
-------- --------
Stockholders' equity........................................ 332,691 290,991
-------- --------
Total capitalization................................ $711,645 $844,945
-------- --------
-------- --------
---------
(a) Includes restricted cash equivalents of $32.5 million.
STOCK REPURCHASE PROGRAM
On January 18, 2001, our management was authorized, when and if market
conditions warrant, and to the extent legally permitted, to purchase from time
to time up to an aggregate of $50 million worth of our Class A common stock
pursuant to a $50 million stock repurchase program that was scheduled to end on
January 18, 2003. In January 2003, the term of the stock repurchase program was
extended until January 18, 2004 and the amount available under the stock
repurchase program was replenished to permit us to repurchase up to a total of
$50 million worth of our Class A common stock on or after January 18, 2003 (in
addition to the $10.5 million previously spent under the program). In connection
with the sale of the notes to the initial purchaser, we repurchased 1.5 million
shares of our Class A common stock under our stock repurchase program for an
aggregate purchase price of $41.7 million. On June 3, 2003, the term of the
stock repurchase program was extended until January 18, 2005 and the amount
available under the stock repurchase program was replenished to permit us to
repurchase up to a total of $50 million worth of our Class A common stock on or
after June 3, 2003.
22
TRIARC COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as of
March 30, 2003 and unaudited pro forma condensed consolidated statements of
operations for the year ended December 29, 2002 and for the three months ended
March 30, 2003 of Triarc Companies, Inc. ('Triarc' and, collectively with its
subsidiaries, the 'Company') have been prepared by adjusting those financial
statements, as derived, reclassified and condensed, as applicable, from the
audited consolidated income statement in the Company's Annual Report on
Form 10-K (the 'Form 10-K') for the year ended December 29, 2002 and from the
unaudited consolidated balance sheet and statement of operations in the
Company's Quarterly Report on Form 10-Q (the 'Form 10-Q') for the three months
ended March 30, 2003, both incorporated by reference in this prospectus. The
adjustments to the unaudited pro forma consolidated balance sheet and the
unaudited pro forma condensed consolidated statement of operations for the three
months ended March 30, 2003 represent adjustments for the offering (the
'Offering') of $175,000,000 of 5% convertible notes due 2023 (the 'Notes') and
the related use of proceeds. The adjustments to the unaudited pro forma
condensed consolidated statement of operations for the year ended December 29,
2002 reflect first, the acquisition of Sybra, Inc. ('Sybra') completed on
December 27, 2002 and second, the Offering and the related use of proceeds. The
use of proceeds consists of the repurchase of 1,500,000 shares of common stock
for treasury for $41,700,000 with the remainder of the net proceeds held for
general corporate purposes. The condensed consolidated statement of operations
of Sybra for the period from December 30, 2001, the first day of Sybra's 2002
fiscal year, to the December 27, 2002 date of the Sybra acquisition included in
the unaudited pro forma condensed consolidated statement of operations for the
year ended December 29, 2002 has been derived, reclassified and condensed from
audited financial statements of Sybra for that period, which are not included or
incorporated by reference herein.
The adjustments to the unaudited pro forma condensed consolidated balance
sheet were determined as if the Offering and the related use of proceeds had
occurred on March 30, 2003. The adjustments, as applicable, to the unaudited pro
forma condensed consolidated statements of operations for the year ended
December 29, 2002 and the three months ended March 30, 2003 were determined as
if the acquisition of Sybra and the Offering and related use of proceeds had
occurred on December 31, 2001.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the Company's consolidated financial statements and
management's discussion and analysis of financial condition and results of
operations contained in the Company's Form 10-K for the year ended December 29,
2002 and the Company's Form 10-Q for the three months ended March 30, 2003.
The unaudited pro forma condensed consolidated financial statements are not
indicative of the actual financial position or results of operations of the
Company had the transactions noted above, as applicable, occurred on
December 31, 2001 or March 30, 2003 or of the future financial position or
results of operations of the Company.
23
TRIARC COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 30, 2003
ADJUSTMENTS FOR PRO FORMA FOR
AS REPORTED THE OFFERING THE OFFERING
ASSETS ----------- ------------ ------------
(IN THOUSANDS)
Current assets:
Cash and cash equivalents..................... $467,525 $175,000 (1) $ 594,125
(41,700)(2)
(6,700)(3)
Short-term investments........................ 157,429 -- 157,429
Receivables................................... 11,499 -- 11,499
Inventories................................... 2,147 -- 2,147
Deferred income tax benefit................... 15,848 -- 15,848
Prepaid expenses and other current assets..... 6,702 -- 6,702
-------- -------- ----------
Total current assets...................... 661,150 126,600 787,750
Restricted cash equivalents....................... 32,470 -- 32,470
Investments....................................... 30,610 -- 30,610
Properties........................................ 112,874 -- 112,874
Goodwill.......................................... 90,689 -- 90,689
Other intangible assets........................... 8,301 -- 8,301
Deferred costs and other assets................... 16,791 6,700 (3) 23,491
-------- -------- ----------
$952,885 $133,300 $1,086,185
-------- -------- ----------
-------- -------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............. $ 38,037 $ -- $ 38,037
Accounts payable.............................. 15,936 -- 15,936
Accrued expenses.............................. 66,334 -- 66,334
Net current liabilities relating to
discontinued operations..................... 35,209 -- 35,209
-------- -------- ----------
Total current liabilities................. 155,516 -- 155,516
Long-term debt.................................... 340,917 175,000 (1) 515,917
Deferred compensation payable to related
parties......................................... 26,495 -- 26,495
Deferred income taxes............................. 60,704 -- 60,704
Other liabilities, deferred income and minority
interests in a consolidated subsidiary.......... 36,562 -- 36,562
Stockholders' equity:
Common stock.................................. 2,955 -- 2,955
Additional paid-in capital.................... 132,186 -- 132,186
Retained earnings............................. 359,021 -- 359,021
Common stock held in treasury................. (160,714) (41,700)(2) (202,414)
Accumulated other comprehensive deficit....... (757) -- (757)
-------- -------- ----------
Total stockholders' equity................ 332,691 (41,700) 290,991
-------- -------- ----------
$952,885 $133,300 $1,086,185
-------- -------- ----------
-------- -------- ----------
24
TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
MARCH 30, 2003
(1) To reflect the gross proceeds for the issuance of the Notes.
(2) To reflect the repurchase of 1,500,000 shares of the
Company's Class A common stock at $27.80 per share in
connection with the issuance of the Notes.
(3) To reflect the payment of estimated fees and expenses
associated with the issuance of the Notes.
25
TRIARC COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 2002
PRO FORMA
FOR THE
PRE- ADJUSTMENTS PRO FORMA SYBRA
ACQUISITION FOR THE FOR THE ADJUSTMENTS ACQUISITION
AS PERIOD OF SYBRA SYBRA FOR THE AND THE
REPORTED SYBRA ACQUISITION ACQUISITION OFFERING OFFERING
-------- ----- ----------- ----------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Revenues:
Net sales................. $ -- $208,260 $ -- $208,260 $ -- $208,260
Royalties and franchise
and related fees........ 97,782 -- (7,465)(3) 90,317 -- 90,317
------- -------- -------- -------- ------- --------
97,782 208,260 (7,465) 298,577 -- 298,577
------- -------- -------- -------- ------- --------
Costs and expenses:
Cost of sales, excluding
depreciation and
amortization............ -- -- 158,812 (1) 149,939 -- 149,939
(7,465)(3)
(1,408)(4)
Restaurant costs and
expenses................ -- 172,721 (172,721)(1) -- -- --
Selling, general and
administrative.......... 75,893 27,870 13,909 (1) 118,644 -- 118,644
972 (2)
Depreciation and
amortization, excluding
amortization of deferred
financing costs......... 6,550 7,351 (7,351)(5) 13,749 -- 13,749
7,099 (6)
100 (7)
------- -------- -------- -------- ------- --------
82,443 207,942 (8,053) 282,332 -- 282,332
------- -------- -------- -------- ------- --------
Operating profit........ 15,339 318 588 16,245 -- 16,245
Interest expense............ (26,210) (10,676) 557 (8) (36,329) (8,750)(12) (46,036)
(957)(13)
Insurance expense related to
long-term debt............ (4,516) -- -- (4,516) -- (4,516)
Investment income, net...... 851 -- (298)(9) 553 -- 553
Costs of proposed business
acquisitions not
consummated............... (2,238) -- -- (2,238) -- (2,238)
Loss on sale of business,
net....................... (1,218) -- -- (1,218) -- (1,218)
Other income, net........... 1,358 88 -- 1,446 -- 1,446
------- -------- -------- -------- ------- --------
Income (loss) from
continuing operations
before income taxes
and minority
interests............. (16,634) (10,270) 847 (26,057) (9,707) (35,764)
(Provision for) benefit from
income taxes.............. 3,329 (1,593) (710)(10) 6,124 3,495 (14) 9,619
972 (2)
4,126 (11)
Minority interests in loss
of a consolidated
subsidiary................ 3,548 -- -- 3,548 -- 3,548
------- -------- -------- -------- ------- --------
Income (loss) from
continuing
operations............ $(9,757) $(11,863) $ 5,235 $(16,385) $(6,212) $(22,597)
------- -------- -------- -------- ------- --------
------- -------- -------- -------- ------- --------
Basic and diluted loss from
continuing operations per
share..................... $ (.48) $ (1.19)(15)
------- --------
------- --------
26
TRIARC COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 2003
AS ADJUSTMENTS FOR PRO FORMA FOR
REPORTED THE OFFERING THE OFFERING
-------- ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Revenues:
Net sales...................................... $48,497 $ -- $48,497
Royalties and franchise and related fees....... 21,237 -- 21,237
------- ------- -------
69,734 -- 69,734
------- ------- -------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization................................. 36,255 -- 36,255
Selling, general and administrative............ 26,480 -- 26,480
Depreciation and amortization, excluding
amortization of deferred financing costs..... 3,383 -- 3,383
------- ------- -------
66,118 -- 66,118
------- ------- -------
Operating profit........................... 3,616 -- 3,616
Interest expense................................... (8,458) (2,188)(12) (10,885)
(239)(13)
Insurance expense related to long-term debt........ (1,092) -- (1,092)
Investment income, net............................. 3,141 -- 3,141
Other income, net.................................. 557 -- 557
------- ------- -------
Loss before income taxes................... (2,236) (2,427) (4,663)
Benefit from income taxes.......................... 262 874 (14) 1,136
------- ------- -------
Net loss................................... $(1,974) $(1,553) $(3,527)
------- ------- -------
------- ------- -------
Basic and diluted net loss per share............... $ (.10) $ (.19)(15)
------- -------
------- -------
27
TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
RECLASSIFICATION OF SYBRA PRE-ACQUISITION CONSOLIDATED INCOME STATEMENT
(1) Reclassify restaurant costs and expenses to 'Cost of sales' or 'Selling,
general and administrative,' as appropriate.
(2) Reclassify state income taxes relating to certain restructuring costs which
are reported net of state taxes to 'Provision for (benefit from) income
taxes.'
ACQUISITION OF SYBRA PRO FORMA ADJUSTMENTS
(3) To reflect the elimination in consolidation of royalty revenues from Sybra
prior to the date of the Sybra Acquisition (the 'Acquisition Date').
(4) To reflect an adjustment to rent expense for the allocation of unfavorable
lease liabilities recorded in the Sybra Acquisition over the remaining
lives of the respective leases.
(5) To reverse Sybra's reported depreciation and amortization through the
Acquisition Date.
(6) To record depreciation and amortization of the tangible and intangible
assets recorded in the Sybra acquisition over the remaining respective
useful lives of the assets.
(7) To record additional amortization of Sybra computer software costs through
the Acquisition Date which had been amortized over 5 years to conform with
the estimated useful life of 3 years for amortization of computer software
costs used by the Company.
(8) To reverse interest expense associated with the $5,525,000 principal amount
of Sybra's long-term debt which was repaid on December 27, 2002 in
connection with the acquisition of Sybra.
(9) To reverse interest income on the $16,093,000 of cash and cash equivalents
used by Triarc in the Sybra acquisition consisting of the $9,750,000
purchase price and $6,343,000 of principal and accrued interest payments on
Sybra debt made on December 27, 2002.
(10) To reflect the income tax provision on the net effect of the above
adjustments at the incremental Federal and state income tax rates of Sybra
and Triarc, as applicable, of 38.6% and 36%, respectively.
(11) To reflect the Federal income tax benefit of Sybra's net loss. Sybra had
provided a valuation allowance for that benefit in the pre-acquisition
period since it was unlikely that Sybra could realize that benefit.
However, if Sybra had been acquired on December 31, 2001, the Company would
not have provided a valuation allowance for the Federal income tax benefit
of Sybra's net loss on a consolidated basis.
OFFERING AND RELATED USE OF PROCEEDS PRO FORMA ADJUSTMENTS
(12) To record interest expense on the Notes at 5%.
(13) To record amortization under the interest rate method of the $6,700,000 of
estimated deferred financing costs associated with the issuance of the
notes through the earliest date the holders of the Notes can require the
Company to repurchase them.
(14) To reflect the income tax benefit of the above adjustments at Triarc's
incremental Federal and state income tax rate of 36%.
(15) The shares used to calculate the as reported loss per share were 20,446,000
for the year ended December 29, 2002 and 20,413,000 for the three months
ended March 30, 2003. The shares used to calculate the loss per share on a
pro forma basis for the Sybra acquisition, as applicable, and the Offering
were 18,946,000 for the year ended December 29, 2002 and 18,913,000 for the
three months ended March 30, 2003 and reflect the pro forma effect of the
1,500,000 shares of Triarc's common stock acquired for treasury in
connection with the
28
Offering as if such shares had been repurchased on December 31, 2001. The
as reported and pro forma diluted loss per share are the same as the
respective basic loss per share for the year ended December 29, 2002 and
the three months ended March 30, 2003 since the effect of all potentially
dilutive securities, including the effect of potential common shares from
an assumed conversion of the Notes, would have been antidilutive.
29
DESCRIPTION OF THE NOTES
The notes were issued under an indenture between us and Wilmington Trust
Company, as trustee. The notes and the shares issuable upon conversion of the
notes are covered by a registration rights agreement. The notes, the indenture
and the registration rights agreement are governed by the law of the State of
New York. Copies of the indenture and the registration rights agreement have
been filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.
The following description is a summary of the material provisions of the
notes, the indenture and the registration rights agreement. It does not purport
to be complete. This summary is subject to and is qualified by reference to all
the provisions of the indenture and the registration rights agreement, including
the definitions of certain terms used in the indenture and the registration
rights agreement. Wherever particular provisions or defined terms of the
indenture or form of note are referred to, these provisions or defined terms are
incorporated in this prospectus by reference.
As used in this 'Description of the Notes' section, references to 'Triarc,'
'the company,' 'we,' 'our' or 'us' refer solely to Triarc Companies, Inc. and
not to our subsidiaries.
GENERAL
The notes are our unsecured and unsubordinated debt and rank on a parity
with all of our other existing and future unsecured and unsubordinated debt and
prior to all of our subordinated debt. The notes are convertible into Class A
common stock as described under 'Conversion of Notes.'
We issued $175,000,000 aggregate principal amount of the notes on May 19,
2003. We issued the notes only in denominations of $1,000 and multiples of
$1,000. The notes will mature on May 15, 2023 unless earlier converted, redeemed
or repurchased.
Neither we nor any of our subsidiaries are subject to any financial
covenants under the indenture. In addition, neither we nor any of our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt, or issuing or repurchasing our securities. You are not afforded protection
under the indenture in the event of a highly leveraged transaction or a change
in control of us except to the extent described below under 'Repurchase at
Option of the Holder Upon a Fundamental Change.'
The notes bear interest at an annual rate of 5%. We will pay interest on May
15 and November 15 of each year, beginning November 15, 2003, to record holders
at the close of business on the preceding May 1 and November 1, as the case may
be, except interest payable upon redemption or repurchase will be paid to the
person to whom principal is payable, unless the redemption date or repurchase
date, as the case may be, is an interest payment date.
We will maintain an office for the payment of interest, which shall
initially be an office or agency of the trustee. We may pay interest either:
o by check mailed to your address as it appears in the note
register, provided that if you are a holder with an
aggregate principal amount in excess of $2.0 million, you
shall be paid, at your written election, by wire transfer in
immediately available funds; or
o by transfer to an account maintained by you in the United
States.
However, payments to The Depository Trust Company, New York, New York, which
we refer to as DTC, will be made by wire transfer of immediately available funds
to the account of DTC or its nominee. Interest will be computed on the basis of
a 360-day year composed of twelve 30-day months.
RANKING
The notes are our general unsecured and unsubordinated obligations and rank
equally in right of payment with all our existing and future unsecured and
unsubordinated obligations. The notes are unsecured and thus rank junior to all
our secured obligations to the extent of the value of the
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collateral securing such secured obligation. As of March 30, 2003, we had
approximately $17.5 million of total secured obligations. The notes are also
effectively subordinated to all liabilities of our subsidiaries. As of March 30,
2003, our subsidiaries had total liabilities of $440.8 million, not including
contingent liabilities or intercompany indebtedness.
CONVERSION OF NOTES
You may convert any of your notes, in whole or in part, into our Class A
common stock prior to the close of business on the final maturity date of the
notes, subject to prior redemption or repurchase of the notes, only under the
following circumstances:
o upon satisfaction of a market price condition;
o upon satisfaction of a trading price condition;
o upon notice of redemption; or
o upon specified corporate transactions.
The number of shares of Class A common stock you will receive upon
conversion of your notes will be determined by multiplying the number of $1,000
principal amount notes you convert by the conversion rate on the date of
conversion. You may convert your notes in part so long as such part is $1,000
principal amount or an integral multiple of $1,000. The initial conversion rate
is equal to 25 shares of our Class A common stock per $1,000 principal amount of
notes, subject to adjustment as described below, which represents an initial
conversion price of $40 per share.
If we call notes for redemption, you may convert the notes only until the
close of business on the business day immediately preceding the redemption date
unless we fail to pay the redemption price. If you have submitted your notes for
redemption upon a fundamental change, you may convert your notes only if you
withdraw your redemption election. Similarly, if you exercise your option to
require us to repurchase your notes other than upon a fundamental change, those
notes may be converted only if you withdraw your election to exercise your
option in accordance with the terms of the indenture.
Upon conversion of notes, a holder will not receive any cash payment of
interest (unless such conversion occurs between a regular record date and the
interest payment date to which it relates). Our delivery to the holder of the
full number of shares of our Class A common stock into which the note is
convertible, together with any cash payment for such holder's fractional shares,
or cash or a combination of cash and shares of our Class A common stock in lieu
thereof, will be deemed to satisfy our obligation to:
o pay the principal amount of the note; and
o pay accrued but unpaid interest, attributable to the period
from the most recent interest payment date through the
conversion date.
Notwithstanding the above, if notes are converted after a record date but
prior to the next succeeding interest payment date, holders of such notes at the
close of business on the record date will receive the interest payable on such
notes on the corresponding interest payment date notwithstanding the conversion.
Such notes, upon surrender for conversion, must be accompanied by funds equal to
the amount of interest payable on the notes so converted; provided that no such
payment need be made if (1) we have specified a redemption date that is after a
record date and prior to the next interest payment date, (2) we have specified a
repurchase date following a fundamental change that is during such period or (3)
only to the extent of overdue interest, any overdue interest exists at the time
of conversion with respect to such note.
CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION
You may surrender your notes for conversion into our Class A common stock
prior to close of business on the maturity date during any fiscal quarter
commencing after June 29, 2003 if the closing sale price of our Class A common
stock exceeds 120% of the conversion price for at least
31
20 trading days in the 30 consecutive trading days ending on the last trading
day of the preceding fiscal quarter.
The 'closing sale price' of our Class A common stock on any date means the
closing per share sale price (or if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average ask prices) on such date as reported
in composite transactions for the principal United States securities exchange on
which our Class A common stock is traded or, if our Class A common stock is not
listed on a United States national or regional securities exchange, as reported
by the Nasdaq System or by the National Quotation Bureau Incorporated. The
'conversion price' as of any day will equal $1,000 divided by the number of
shares of Class A common stock issuable upon a conversion of $1,000 principal
amount of notes.
CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION
You may surrender your notes for conversion into our Class A common stock
prior to maturity during the five business day period after any ten consecutive
trading day period in which the 'trading price' per $1,000 principal amount of
notes, as determined following a request by a holder of notes in accordance with
the procedures described below, for each day of that period was less than 95% of
the product of the closing sale price of our Class A common stock and the number
of shares issuable upon conversion of $1,000 principal amount of notes (the
'trading price condition'); provided that if on the date of any conversion
pursuant to the trading price condition that is on or after May 15, 2018, the
closing sale price of our Class A common stock is greater than the conversion
price, then you will receive, in lieu of Class A common stock based on the
conversion price, cash or Class A common stock or a combination of cash and
Class A common stock, at our option, with a value equal to the principal amount
of your notes plus accrued and unpaid interest, as of the conversion date
('Principal Value Conversion'). If you surrender your notes for conversion and
it is a Principal Value Conversion, we will notify you by the second trading day
following the date of conversion whether we will pay you all or a portion of the
principal amount plus accrued and unpaid interest in cash, Class A common stock
or a combination of cash and Class A common stock, and in what percentage. Any
Class A common stock delivered upon a Principal Value Conversion will be valued
at the greater of the conversion price on the conversion date and the applicable
stock price as of the conversion date. We will pay you any portion of the
principal amount plus accrued and unpaid interest to be paid in cash and deliver
Class A common stock with respect to any portion of the principal amount plus
accrued and unpaid interest to be paid in Class A common stock no later than the
third business day following the determination of the applicable stock price.
The 'trading price' of the notes on any date of determination means the
average of the secondary market bid quotations obtained by the trustee for
$5,000,000 principal amount of the notes at approximately 3:30 p.m., New York
City time, on such determination date from three independent nationally
recognized securities dealers we select; provided that if three such bids cannot
reasonably be obtained by the trustee, but two such bids are obtained, then the
average of the two bids shall be used, and if only one such bid can reasonably
be obtained by the trustee, that one bid shall be used. If the trustee cannot
reasonably obtain at least one bid for $5,000,000 principal amount of the notes
from a nationally recognized securities dealer then the trading price per $1,000
principal amount of notes will be deemed to be less than 95% of the product of
the 'closing sale price' of our Class A common stock and the number of shares
issuable upon conversion of $1,000 principal amount of the notes.
In connection with any conversion upon satisfaction of the above trading
price condition, the trustee shall have no obligation to determine the trading
price of the notes unless we have requested such determination, and we shall
have no obligation to make such request unless you provide us with reasonable
evidence that the trading price per $1,000 principal amount of notes would be
less than 95% of the product of the closing sale price of our Class A common
stock and the number of shares of Class A common stock issuable upon conversion
of $1,000 principal amount of the notes. At such time, we shall instruct the
trustee to determine the trading price of
32
the notes beginning on the next trading day and on each successive trading day
until the trading price per $1,000 principal amount of notes is greater than or
equal to 95% of the product of the closing sale price of our Class A common
stock and the number of shares issuable upon conversion of $1,000 principal
amount of the notes.
CONVERSION UPON NOTICE OF REDEMPTION
If we call notes for redemption, you may convert the notes until the close
of business on the business day immediately preceding the redemption date, after
which time your right to convert will expire unless we default in the payment of
the redemption price.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
If we elect to:
o distribute to all holders of our Class A common stock
certain rights entitling them to purchase, for a period
expiring within 45 days, our Class A common stock at less
than the average closing sale price of our Class A common
stock for the 10 trading days immediately preceding the
declaration date for such distribution); or
o distribute to all holders of our Class A common stock,
assets (exclusive of cash dividends that would not cause an
adjustment to the conversion rate), debt securities or
certain rights to purchase our securities, which
distribution has a per share value exceeding 5% of the
closing sale price of our Class A common stock on the day
immediately preceding the declaration date for such
distribution;
we must notify you at least 20 days prior to the ex-dividend date for such
distribution. Once we have given such notice, you may surrender your notes for
conversion at any time until the earlier of close of business on the business
day immediately preceding the ex-dividend date or any announcement by us that
such distribution will not take place. No adjustment to your ability to convert
will be made if you will otherwise participate in the distribution without
conversion.
In addition, if we are a party to a consolidation, merger, binding share
exchange or sale of all or substantially all of our assets, in each case
pursuant to which our Class A common stock would be converted into cash,
securities or other property, you may surrender your notes for conversion at any
time from and after the date which is 15 days prior to the anticipated effective
date of the transaction until and including the date which is 15 days after the
actual date of such transaction. If we are a party to a consolidation, merger,
binding share exchange or sale of all or substantially all of our assets, in
each case pursuant to which our Class A common stock is converted into cash,
securities, or other property, then at the effective time of the transaction,
your right to convert a note into our Class A common stock will be changed into
a right to convert it into the kind and amount of cash, securities and other
property which you would have received if you had converted your notes
immediately prior to the transaction. If the transaction also constitutes a
fundamental change, you can require us to redeem all or a portion of your notes
as described under 'Redemption at Option of the Holder Upon a Fundamental
Change.'
CONVERSION PROCEDURES
The initial conversion rate for the notes is 25 shares of Class A common
stock per $1,000 principal amount of notes (equal to an initial conversion price
of $40 per share), subject to adjustment as described below. We will not issue
fractional shares of Class A common stock upon conversion of notes. Instead, we
will pay cash equal to the closing price of the Class A common stock on the
trading day prior to the conversion date. Except as described below, you will
not receive any accrued interest or dividends upon conversion.
To convert your note into Class A common stock you must do the following (or
comply with DTC procedures for doing so in respect of your beneficial interest
in notes evidenced by a global note held by DTC):
33
o complete and manually sign the conversion notice on the back
of the note or facsimile of the conversion notice and
deliver this notice to the conversion agent;
o surrender the note to the conversion agent;
o if required, furnish appropriate endorsements and transfer
documents;
o if required, pay all transfer or similar taxes; and
o if required, pay funds equal to interest payable on the next
interest payment date.
In lieu of delivery of shares of our Class A common stock upon conversion of
any notes, for all or any portion of the notes, we may elect to pay holders
surrendering notes an amount in cash per note (or a portion of a note) equal to
the applicable stock price multiplied by the conversion rate in effect on the
conversion date. We will inform the holders through the trustee no later than
two business days following the conversion date of our election to deliver
shares of our Class A common stock or to pay cash in lieu of delivery of the
shares. Shares of our Class A common stock and cash deliverable upon conversion
will be delivered through the conversion agent no later than the third business
day following the determination of the applicable stock price. If we elect to
pay all of such payment in cash, we will then be obligated to pay to holders
surrendering notes no later than the third business day following the applicable
conversion date. If an event of default, as described under ' -- Events of
Default; Waiver and Notice' below (other than a default in a cash payment upon
conversion of the notes), has occurred and is continuing, we may not pay cash
upon conversion of any notes or portion of the notes (other than cash for
fractional shares).
The 'applicable stock price' means, in respect of a date of determination,
the average of the closing sale prices per share of Class A common stock over
the five-trading day period starting the third trading day following such date
of determination.
The date you comply with these requirements is the conversion date under the
indenture.
We will adjust the conversion rate if any of the following events occurs:
o we issue common stock as a dividend or distribution on our
Class A common stock;
o we issue to all holders of Class A common stock certain
rights or warrants to purchase our Class A common stock at a
price per share that is less than the then current market
price of our Class A common stock, as defined in the
indenture;
o we subdivide or combine our Class A common stock;
o we distribute to all holders of our Class A common stock,
shares of our capital stock, evidences of indebtedness or
assets, including securities but excluding:
o rights or warrants specified above;
o dividends or distributions specified above; and
o cash distributions.
If we distribute capital stock of, or similar equity interests in,
a subsidiary or other business unit of ours, the conversion rate
will be adjusted based on the market value of the securities so
distributed relative to the market value of our Class A common
stock, in each case based on the average closing sale prices of
those securities for the 10 trading days commencing on and
including the fifth trading day after the date on which
'ex-dividend trading' commences for such distribution on the New
York Stock Exchange or such other national or regional exchange or
market on which the securities are then listed or quoted.
o we distribute cash, excluding any dividend or distribution
in connection with our liquidation, dissolution or winding
up or any cash dividend on our Class A common stock to the
extent that the aggregate percentage (calculated as the sum
of the percentages that each dividend represents of the
average last reported sale price of our Class A common stock
during the ten trading days immediately prior to the
declaration date of such dividend) of all dividends declared
during the twelve month period through and including the
applicable date of declaration does not exceed 5%; and
34
o we or one of our subsidiaries makes a payment in respect of
a tender offer or exchange offer for our Class A common
stock to the extent that the cash and value of any other
consideration included in the payment per share of Class A
common stock exceeds the current market price per share of
Class A common stock on the trading day next succeeding the
last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer.
To the extent that we have a rights plan in effect, upon conversion of the
notes into Class A common stock you will receive, in addition to the Class A
common stock, the rights under the rights plan unless the rights have separated
from the Class A common stock at the time of conversion, in which case the
conversion rate will be adjusted as if we distributed to all holders of our
Class A common stock, shares of our capital stock, evidences of indebtedness or
assets as described under the fourth bullet above, subject to readjustment in
the event of the expiration, termination or redemption of such rights.
In the event of:
o any reclassification of our Class A common stock;
o a consolidation, merger or combination involving us; or
o a sale or conveyance to another person or entity of all or
substantially all of our property and assets;
in which holders of our Class A common stock would be entitled to receive stock,
other securities, other property, assets or cash for their Class A common stock,
upon conversion of your notes you will be entitled to receive the same type of
consideration which you would have been entitled to receive if you had converted
the notes into our Class A common stock immediately prior to any of these
events.
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of Class A common stock or in certain other
situations requiring a conversion rate adjustment. See 'United States Federal
Income Tax Consequences.'
We may, from time to time, increase the conversion rate if our board of
directors has made a determination that this increase would be in our best
interests. Any such determination by our board will be conclusive. We will give
holders notice of any increase in the conversion rate. In addition, we may
increase the conversion rate if our board of directors deems it advisable to
avoid or diminish any income tax to holders of Class A common stock resulting
from any stock or rights distribution. See 'United States Income Federal Tax
Consequences.'
We will not be required to make an adjustment in the conversion rate unless
the adjustment would require a change of at least 1% in the conversion rate.
However, we will carry forward any adjustments that are less than 1% of the
conversion rate. Except as described above in this section, we will not adjust
the conversion rate for any issuance of our Class A common stock or convertible
or exchangeable securities or rights to purchase our Class A common stock or
convertible or exchangeable securities.
OPTIONAL REDEMPTION BY TRIARC
Beginning May 20, 2010, we have the right to redeem the notes in whole or in
part for cash at a price of 100% of the principal amount plus accrued and unpaid
interest to, but excluding, the redemption date. If the redemption date is an
interest payment date, interest shall be paid to the record holder on the
relevant record date. We are required to give notice of redemption by mail to
holders not more than 60 but not less than 30 days prior to the redemption date.
If less than all of the outstanding notes are to be redeemed, the trustee
will select the notes to be redeemed in principal amounts of $1,000 or integral
multiples of $1,000 by lot, pro rata or by another method the trustee considers
fair and appropriate. If a portion of your notes is selected for partial
redemption and you convert a portion of your notes, the converted portion will
be deemed to be of the portion selected for redemption.
35
We may not redeem the notes pursuant to the optional redemption provisions
of the indenture if we have failed to pay any interest on the notes and such
failure to pay is continuing. We will notify the noteholders if we redeem the
notes.
REPURCHASE AT OPTION OF THE HOLDER
You have the right to require us to repurchase the notes for cash on May 15
of 2010, 2015 and 2020. We may also add additional dates on which you may
require us to repurchase all or a portion of your notes, however we are not
obligated to do so. We will be required to repurchase any outstanding note for
which you deliver a written repurchase notice to the paying agent. This notice
must be delivered during the period beginning at any time from the opening of
business on the date that is 20 business days prior to the repurchase date until
the close of business on the repurchase date. If a repurchase notice is given
and withdrawn during that period, we will not be obligated to repurchase the
notes listed in the notice. Our repurchase obligation will be subject to certain
additional conditions.
The repurchase price payable for a note will be equal to the principal
amount plus accrued and unpaid interest to, but excluding, the repurchase date.
Your right to require us to repurchase notes is exercisable by delivering a
written repurchase notice to the paying agent within 20 business days of the
repurchase date. The paying agent initially is the trustee.
The repurchase notice must state:
(1) if certificated notes have been issued, the note certificate numbers
(or, if your notes are not certificated, your repurchase notice must comply
with appropriate DTC procedures);
(2) the portion of the principal amount of notes to be repurchased,
which must be in $1,000 multiples; and
(3) that the notes are to be repurchased by us pursuant to the
applicable provisions of the notes and the indenture.
You may withdraw any written repurchase notice by delivering a written
notice of withdrawal to the paying agent prior to the close of business of the
repurchase date. The withdrawal notice must state:
o the principal amount of the withdrawn notes;
o if certificated notes have been issued, the certificate
numbers of the withdrawn notes (or, if your notes are not
certificated, your withdrawal notice must comply with
appropriate DTC procedures); and
o the principal amount, if any, which remains subject to the
repurchase notice.
We must give notice of an upcoming repurchase date to all noteholders not
less than 20 business days prior to the repurchase date at their addresses shown
in the register of the registrar. We will also give notice to beneficial owners
as required by applicable law. This notice will state, among other things:
o the repurchase price; and
o the procedures that holders must follow to require us to
repurchase their notes.
Payment of the repurchase price for a note for which a repurchase notice has
been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of the note, together with necessary endorsements, to the paying agent
at its office, at any time after delivery of the repurchase notice. Payment of
the repurchase price for the note will be made promptly following the later of
the repurchase date and the time of book-entry transfer or delivery of the note.
If the paying agent holds money sufficient to pay the repurchase price of the
note on the business day following the repurchase date, then, on and after the
date:
o the note will cease to be outstanding;
o interest will cease to accrue; and
36
o all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the note has
been made or the note has been delivered to the paying agent, and all other
rights of the note holder will terminate, other than the right to receive the
repurchase price upon delivery of the note.
Our ability to repurchase notes with cash may be limited by the terms of our
then-existing borrowing agreements. Even though we become obligated to
repurchase any outstanding note on a repurchase date, we may not have sufficient
funds to pay the repurchase price on that repurchase date. See 'Risk
Factors -- We may not have the financial resources to repurchase the notes upon
the occurrence of a fundamental change or at the option of a holder.'
We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act that may be applicable in connection with any offer
by us to repurchase the notes.
REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a fundamental change of Triarc occurs at any time prior to the maturity
of the notes, you may require us to redeem your notes, in whole or in part, on a
repurchase date that is 30 days after the date of our notice of the fundamental
change. The notes will be redeemable in integral multiples of $1,000 principal
amount. We will redeem the notes at a price equal to 100% of the principal
amount to be redeemed, plus accrued interest to, but excluding, the repurchase
date. If the repurchase date is an interest payment date, we will pay interest
to the record holder on the relevant record date.
We may, at our option, elect to pay the redemption price in shares of our
Class A common stock or, in the case of a merger in which we are not the
surviving corporation, common stock or American Depositary Shares, of the
surviving corporation or its direct or indirect parent corporation, cash or a
combination of stock and cash. The number of shares of common stock a holder
will receive will equal the relevant amount of the repurchase price to be paid
in common stock divided by 95% of the closing sale price of the common stock for
the five trading days ending on the third business day prior to the applicable
repurchase date. We will not, however, deliver fractional shares in repurchases
using shares of common stock as consideration. Note holders who would otherwise
be entitled to receive fractional shares will instead receive cash in an amount
equal to the market price of a share of the common stock multiplied by such
fraction. We may not pay the repurchase price in common stock or a combination
of common stock and cash, unless we satisfy certain conditions prior to the
repurchase date as provided in the indenture, including:
o registration of the shares of common stock or American
Depositary Shares to be issued upon repurchase under the
Securities Act and the Exchange Act, if required;
o qualification or registration of the shares of common stock
or American Depositary Shares to be issued upon repurchase
under applicable state securities laws, if necessary, or the
availability of an exemption therefrom; and
o listing of the common stock or American Depositary Shares on
a United States national securities exchange or quoted on an
inter-dealer quotation system of any registered United
States national securities association.
Within 10 days after the occurrence of a fundamental change, we are required
to give you notice of the fundamental change, the repurchase date, and whether
the redemption price will be paid in cash, common stock, or a combination
thereof. We are also required to deliver to the trustee a copy of the
fundamental change notice.
To exercise the repurchase right, you must deliver prior to the close of
business on the second business day immediately preceding the repurchase date
written notice to the trustee of your exercise of your redemption right,
together with the notes with respect to which your right is being exercised. You
may withdraw this notice by delivering to the trustee a notice of withdrawal
prior to the close of business on the business day immediately preceding the
repurchase date. We
37
will promptly pay the redemption price for notes surrendered for redemption
following the repurchase date.
Because the market price of the common stock will be determined prior to the
applicable repurchase date, note holders bear the market risk that the common
stock will decline in value between the date the market price is calculated and
the repurchase date.
'Fundamental Change' is any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which all or
substantially all of our Class A common stock is exchanged for, converted into,
acquired for or constitutes solely the right to receive, consideration which is
not all or substantially all common stock that:
o is listed on, or immediately after the transaction or event
will be listed on, a United States national securities
exchange, or
o is approved, or immediately after the transaction or event
will be approved, for quotation on the Nasdaq National
Market or any similar United States system of automated
dissemination of quotations of securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change redemption rights could discourage a potential
acquirer. However, this fundamental change redemption feature is not the result
of management's knowledge of any specific effort to obtain control of us by
means of a merger, tender offer or solicitation, or part of a plan by management
to adopt a series of anti-takeover provisions. The term 'fundamental change' is
limited to specified transactions and may not include other events that might
adversely affect our financial condition or business operations. Our obligation
to offer to redeem the notes upon a fundamental change would not necessarily
afford you protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
We may be unable to redeem the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
redemption price in cash for all tendered notes. Our current debt instruments
contain, and any future credit agreements or other agreements relating to our
indebtedness may contain, provisions prohibiting redemption of the notes under
certain circumstances, or expressly prohibit our repurchase of the notes upon a
fundamental change or may provide that a fundamental change constitutes an event
of default under that agreement. If a fundamental change occurs at a time when
we are prohibited from purchasing or redeeming notes in cash, we could seek the
consent of our lenders to redeem the notes or attempt to refinance this debt or
pay in common stock if the conditions for paying in common stock are satisfied.
Our failure to redeem tendered notes for either cash or common stock would
constitute an event of default under the indenture, which might constitute a
default under the terms of our other indebtedness.
MERGER AND SALE OF ASSETS BY TRIARC
The indenture provides that we may not consolidate with or merge with or
into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to another person, unless among other items:
o we are the surviving person, or the resulting, surviving or
transferee person, if other than us is organized and
existing under the laws of the United States, any state
thereof or the District of Columbia;
o the successor person assumes all of our obligations under
the notes and the indenture; and
o after giving affect to such transaction, there is no event
of default and no event which, after notice or passage of
time or both, would become an event of default.
The indenture provides that the transfer by us of all or substantially all
of our cash, cash equivalents and marketable securities of non-affiliates for
which we receive fair market value, as
38
determined by our board of directors, will not constitute a sale of all or
substantially all of our assets.
When such a person assumes our obligations in such circumstances, subject to
certain exceptions, we shall be discharged from all obligations under the notes
and the indenture.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following constitute events of default under the indenture:
o we fail to pay principal or premium, if any, when due upon
redemption or otherwise on the notes;
o we fail to pay any interest and liquidated damages, if any,
on the notes, when due and such failure continues for a
period of 30 days;
o we fail to provide notice of the occurrence of a fundamental
change on a timely basis;
o we fail to perform or observe any of the covenants in the
indenture for 60 days after notice; or
o certain events involving our bankruptcy, insolvency or
reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, if any, and accrued interest and liquidated damages, if any,
on the outstanding notes to be immediately due and payable. In case of certain
events of bankruptcy or insolvency involving us, the principal, premium, if any,
and accrued interest and liquidated damages, if any, on the notes will
automatically become due and payable. However, if we cure all defaults, except
the nonpayment of principal, premium, if any, interest or liquidated damages, if
any, that became due as a result of the acceleration, and meet certain other
conditions, with certain exceptions, this declaration may be cancelled and the
holders of a majority of the principal amount of outstanding notes may waive
these past defaults.
Payments of principal, premium, if any, or interest on the notes that are
not made when due will accrue interest at the annual rate of 1% above the then
applicable interest rate from the required payment date.
The holders of a majority of outstanding notes will have the right to direct
the time, method and place of any proceedings for any remedy available to the
trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal, premium, if any, or interest
on the notes, unless:
o the holder has given the trustee written notice of an event
of default;
o the holders of at least 25% in principal amount of
outstanding notes make a written request, and offer
reasonable indemnity, to the trustee to pursue the remedy;
o the trustee does not receive an inconsistent direction from
the holders of a majority in principal amount of the notes;
and
o the trustee fails to comply with the request within 60 days
after receipt.
MODIFICATION AND WAIVER
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
note if it would:
o extend the fixed maturity of any note;
39
o reduce the rate or extend the time for payment of interest
or liquidated damages of any note;
o reduce the principal amount or premium, if any, of any note;
o reduce any amount payable upon redemption at the option of
the holder upon a fundamental change of any note;
o adversely change our obligation to redeem any note upon a
fundamental change;
o impair the right of a holder to institute suit for payment
on any note;
o change the currency in which any note is payable;
o impair the right of a holder to convert any note;
o reduce the quorum or voting requirements under the
indenture;
o change any obligation of ours to maintain an office or
agency in the places and for the purposes specified in the
indenture;
o subject to specified exceptions, modify certain of the
provisions of the indenture relating to modification or
waiver of provisions of the indenture; or
o reduce the percentage of notes required for consent to any
modification of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
FORM, DENOMINATION AND REGISTRATION
We issued the notes:
o in fully registered form;
o without interest coupons; and
o in denominations of $1,000 principal amount and integral
multiples of $1,000.
GLOBAL NOTE, BOOK-ENTRY FORM
The notes are currently evidenced by a global note. We have deposited the
global note with DTC and registered the global note in the name of Cede & Co. as
DTC's nominee. Except as set forth below, a global note may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
Beneficial interests in a global note may be held through organizations that
are participants in DTC (called 'participants'). Transfers between participants
will be effected in the ordinary way in accordance with DTC rules and will be
settled in clearing house funds. The laws of some states require that certain
persons take physical delivery of securities in definitive form. As a result,
the ability to transfer beneficial interests in the global note to such persons
may be limited.
Beneficial interests in a global note held by DTC can only be held through
participants, or certain banks, brokers, dealers, trust companies and other
parties that clear through or maintain a custodial relationship with a
participant, either directly or indirectly (called 'indirect participants'). So
long as Cede & Co., as the nominee of DTC, is the registered owner of a global
note, Cede & Co. for all purposes will be considered the sole holder of such
global note. Except as provided below, owners of beneficial interests in a
global note will:
o not be entitled to have certificates registered in their
names;
o not receive physical delivery of certificates in definitive
registered form; and
o not be considered holders of the global note.
We will pay interest on and the redemption price of a global note to Cede &
Co., as the registered owner of the global note, by wire transfer of immediately
available funds on each interest payment date or the repurchase date. Neither
we, the trustee nor any paying agent will be responsible or liable for:
40
o the records relating to, or payments made on account of,
beneficial ownership interests in a global note; or
o maintaining, supervising or reviewing any records relating
to the beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a global
note as shown in the records of DTC, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in the principal amount represented by a global
note held through participants will be the responsibility of the participants,
as is now the case with securities held for the accounts of customers registered
in 'street name.'
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing its interest.
Neither we, the trustee, registrar, paying agent nor conversion agent will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of notes, including the presentation of
notes for exchange, only at the direction of one or more participants to whose
account with DTC interests in the global note are credited, and only in respect
of the principal amount of the notes represented by the global note as to which
the participant or participants has or have given such direction.
DTC has advised us that it is:
o a limited purpose trust company organized under the laws of
the State of New York, and a member of the Federal Reserve
System;
o a 'clearing corporation' within the meaning of the Uniform
Commercial Code; and
o a 'clearing agency' registered pursuant to the provisions of
Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for
global notes.
REGISTRATION RIGHTS OF THE NOTEHOLDERS
In connection with the sale of the notes to the initial purchaser, we
entered into a registration rights agreement with the initial purchaser.
Pursuant to our obligations under the registration rights agreement, we have
filed a shelf registration statement, of which this prospectus forms a part,
with the SEC covering resale of the registrable securities. We will use
reasonable efforts to keep the shelf registration statement effective until the
earlier of:
o all of the registrable securities have been sold pursuant to
the shelf registration statement; or
41
o the expiration of the holding period under Rule 144(k) under
the Securities Act, or any successor provision.
When we use the term 'registrable securities' in this section, we are
referring to the notes and the Class A common stock issuable upon conversion of
the notes until the earliest of:
o the effective registration under the Securities Act and the
resale of the securities in accordance with the registration
statement;
o the expiration of the holding period under Rule 144(k) under
the Securities Act; and
o the sale to the public pursuant to Rule 144 under the
Securities Act, or any similar provision then in force, but
not Rule 144A.
We may suspend the use of the prospectus under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events. Any suspension period shall not:
o exceed 45 days in any three-month period; or
o an aggregate of 120 days for all periods in any 12-month
period.
Notwithstanding the foregoing, we will be permitted to suspend the use of
the prospectus for up to 60 days in any 3-month period under certain
circumstances, relating to possible acquisitions, financings or other similar
transactions.
We will pay predetermined liquidated damages if this prospectus is
unavailable for periods in excess of those permitted above:
o on the notes at an annual rate equal to 0.25% for the first
90 days and 0.50% thereafter of the aggregate principal
amount of the notes outstanding during the additional period
this prospectus is unavailable; and
o on the Class A common stock that has been converted, at an
annual rate equal to 0.25% for the first 90 days and 0.50%
thereafter of an amount equal to $1,000 divided by the
conversion rate during such periods.
A holder who elects to sell registrable securities pursuant to the shelf
registration statement will be required to:
o be named as a selling securityholder in the related
prospectus;
o deliver a prospectus to purchasers; and
o be subject to the provisions of the registration rights
agreement, including indemnification provisions.
Under the registration rights agreement we will:
o pay all expenses of the shelf registration statement;
o provide each registered holder copies of the prospectus;
o notify holders when the shelf registration statement has
become effective; and
o take other reasonable actions as are required to permit
unrestricted resales of the registrable securities in
accordance with the terms and conditions of the registration
rights agreement.
In order to sell registrable securities, a holder of registrable securities
must complete and deliver a questionnaire to us prior to its intended
distribution. Upon receipt of a completed questionnaire after that time,
together with any other information we may reasonably request following the
effectiveness, we will, within 5 business days, file any amendments to the shelf
registration statement or supplements to the related prospectus as are necessary
to permit holders to deliver this prospectus to purchasers of registrable
securities, subject to our right to suspend the use of the prospectus. We will
pay the predetermined liquidated damages described above to the holder if we
fail to make the filing in the time required or, if such filing is a
post-effective amendment to the shelf registration statement required to be
declared effective under the Securities Act, if such amendment is not declared
effective within 45 days of the filing. Holders who do not complete and deliver
a questionnaire or provide the other information we may request
42
will not be named as a selling securityholder in this prospectus and will not be
permitted to sell their registrable securities pursuant to the shelf
registration statement.
INFORMATION CONCERNING THE TRUSTEE
We have appointed Wilmington Trust Company, the trustee under the indenture,
as paying agent, conversion agent, note registrar and custodian for the notes.
The trustee or its affiliates may provide banking and other services to us in
the ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, if
it or any of its affiliates is then our creditor, to obtain payment of claims in
certain cases or to realize on certain property received on any claim as
security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
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DESCRIPTION OF OUR CAPITAL STOCK
GENERAL
The following is a description of the material terms of our capital stock.
Because it is a summary, the following description is not complete and is
subject to and qualified in its entirety by reference to our certificate of
incorporation (the 'certificate of incorporation') and our by-laws.
Our authorized capital stock consists of 300,000,000 shares, of which
100,000,000 are shares of Class A common stock, 100,000,000 shares are of Class
B common stock and 100,000,000 shares of preferred stock. As of May 31, 2003,
there were 19,104,724 shares of Class A common stock issued and outstanding, and
no shares of Class B common stock or the preferred stock were outstanding.
Our Class A common stock is listed and trades on the NYSE under the ticker
symbol 'TRY.'
CLASS A COMMON STOCK
Holders of our Class A common stock are entitled to one vote for each share
held on record on all matters on which stockholders are entitled to vote,
including the election of directors. Generally, holders of Class A common stock
are not entitled to vote on any amendment to our certificate of incorporation
that relates solely to the terms of the Class B common stock; provided, however,
that the number of shares of Class B common stock may be increased or decreased
by the affirmative majority vote of the holders of the Class A common stock
without a separate class vote of the Class B common stock or any series thereof.
Subject to the preferences that may be applicable from time to time to any
outstanding Class B common stock or preferred stock, the holders of our shares
of Class A common stock are entitled to receive ratably any dividends lawfully
declared from time to time by our board of directors. The outstanding shares of
Class A common stock are, and the shares of Class A common stock when issued
upon the conversion of the notes offered hereby will be, fully paid and
nonassessable. Additional authorized but unissued Class A common stock may be
issued by our board of directors without the approval of stockholders. No
dividend, other than a stock dividend payable in Class A common stock, may be
paid on the Class A common stock if we are in arrears on the payment of
dividends on any outstanding preferred stock.
In the event that we liquidate, dissolve or are wound up, whether
voluntarily or involuntarily, to the extent assets remain after payment of
creditors in full and after there has been paid or set aside for all Class B
common stock (if it is issued with rights and privileges greater than the
Class A common stock) and preferred stock then outstanding, the full
preferential amounts to which they are entitled, our net assets will be divided
ratably among the holders of the Class A common stock and Class B common stock
(if issued with rights and privileges equal to those of the Class A common
stock). The merger or consolidation of us with or into any other corporation,
the merger or consolidation of any other corporation with or into us, or the
sale, lease or conveyance of all or substantially all of our assets would not be
deemed to be a liquidation, dissolution or winding up for this purpose. Holders
of Class A common stock are not entitled as of right to purchase or subscribe
for any shares of stock of any class whether heretofore or hereafter authorized
or issued, whether issued for cash, property, services or by way of a dividend.
CLASS B COMMON STOCK AND PREFERRED STOCK
Our board of directors has the authority, without further action by the
stockholders, to issue up to 100,000,000 shares of Class B common stock and
100,000,000 shares of preferred stock in one or more series and to fix the
designations, powers, preferences privileges and relative participation,
optional or special rights and the qualifications, limitations or restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of our Class A common stock.
PRE-EMPTIVE RIGHTS
Under Delaware law, a shareholder is not entitled to pre-emptive rights to
subscribe for additional issuances of Class A common stock or any security
convertible into stock in proportion
44
to the shares that are owned unless there is a provision to the contrary in the
certificate of incorporation. Our certificate of incorporation does not provide
that our stockholders are entitled to pre-emptive rights.
LIQUIDATION
Under Delaware law, if the board of directors deems it advisable that we be
dissolved, it is to propose by a majority of the votes of the members thereof an
agreement of dissolution and within 10 days must call or cause to be called, in
accordance with applicable law, a meeting of stockholders, to vote on the
resolution passed by the board of directors proposing the dissolution. At the
stockholders' meeting, the holders of a majority of shares with voting rights on
the matter can adopt the resolution for the dissolution of the company. The
dissolution of the company may also be adopted by written consent in lieu of
meeting of the holders of all shares having voting power.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions in our certificate of incorporation are intended to
discourage or delay a hostile takeover of control of us. These provisions, in
general terms, (i) provide that the number of directors shall not be less than
seven nor more than 15, with the exact number to be determined from time to time
by a majority of the board of directors then in office; (ii) provide that
vacancies on the board of directors resulting from an increase in size, removal
of directors or otherwise may be filled only by a majority of the remaining
directors then in office; and (iii) require the affirmative vote of the holders
of shares representing at least 75% of the voting power of the 'voting shares'
(as defined below) in order to enter into certain 'business combinations' (as
defined below), unless (A) such business combinations are approved by at least a
majority of our entire board or directors, but only if a majority of the
directors acting favorably on the matter are 'continuing directors' (as defined
below), or (B) certain minimum price, form of consideration and procedural
requirements are met. The term 'voting shares' is defined as any issued and
outstanding shares of our capital stock entitled to vote generally in the
election of directors. Each of the provisions has particular anti-takeover
effects associated with it, and these effects together with a more detailed
description of each provision are set forth below. In addition, the
anti-takeover provisions are interrelated and have cumulative anti-takeover
effects.
The principal purpose of these provisions is to provide a measure of
assurance that a stockholder or group of stockholders owning a controlling
interest in our stock do not exercise their voting power in a manner which our
board of directors believes would be to the detriment of the remaining
stockholders. The provisions are further intended to make it more difficult for
a hostile or unfriendly party to obtain control over us by replacing the board
of directors.
SIZE OF THE BOARD OF DIRECTORS AND FILLING VACANCIES ON THE BOARD OF
DIRECTORS.
Our certificate of incorporation states that our board of directors must
consist of not less than seven nor more than 15 members; provided, however, that
the maximum number may be increased to reflect the right of holders of preferred
stock to elect directors in certain circumstances with the exact number of
directors to be fixed by a majority vote of the directors then in office and
that such authority of our board of directors is exclusive. Our certificate of
incorporation further provides that vacancies that may occur between annual
meetings, including vacancies caused by an increase in the number of directors,
may be filled only by a majority of the remaining directors then in office, even
if less than a quorum, subject to the rights of holders of any class or series
of preferred stock to elect directors. In addition, the provision provides that
any new director elected to fill a vacancy on our board of directors will serve
for the remainder of the full term of that director for which the vacancy
occurred and no decrease in the number of directors shall shorten the term of
any incumbent. The purpose of including these provisions with respect to the
size of our board of directors and the filling of vacancies is to prevent the
elimination of such provisions through amendment of our by-laws by a stockholder
or group owning or controlling a substantial
45
voting block so as to permit stockholders directly to increase the size of our
board of directors and to fill vacancies resulting therefrom or otherwise, which
would enable such stockholder or group of stockholders to elect its own nominees
to the vacancies. This would be possible because, under Delaware law,
stockholders may amend the by-laws without prior approval of the board of
directors, whereas our certificate of incorporation may be amended only if our
board of directors first approves and recommends such action to stockholders.
BUSINESS COMBINATION PROVISION.
Our certificate of incorporation further provides that the approval of the
holders of shares representing at least 75% of the voting power of the voting
shares is required in order to approve certain business combinations if an
'interested stockholder' (as defined below) is a party to the transaction or its
percentage equity interest in us or any of our subsidiaries would be increased
by the transaction. The required 75% approval of any business combination must
include the affirmative vote of the holders of shares representing at least a
majority of the voting power of all of the then outstanding voting shares
exclusive of those shares beneficially owned by any interested stockholder.
The voting requirements outlined above will not apply, however, if:
(i) immediately prior to the time the business combination is consummated,
we are the 'beneficial owner' (defined below) of a majority of each
class of the outstanding equity securities of the interested
stockholder;
(ii) the business combination was approved by at least a majority of our
board of directors (even though not the entire board of directors), but
only if a majority of the directors acting favorably upon such matter
are continuing directors; or
(iii) the consideration to be received by the holders of each class of our
outstanding voting shares acquired by the interested stockholder is at
least equal to the greater of the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees
and with approximate adjustments for recapitalizations, stock splits,
reverse stock splits and stock dividends) paid by the interested
stockholder for any shares of such class
(1) within the two-year period immediately prior to the first public
announcement of the proposal of the business combination or
(2) in the transaction in which it became an interested stockholder, and
is in cash or in the same form of consideration as the interested
stockholder paid to acquire the largest number of voting shares
previously acquired by it.
The pricing provision does not guarantee that a stockholder will receive the
highest market price paid for such shares, rather it ensures that a stockholder
will receive the highest price paid for such shares by an interested stockholder
during the prior two years. If either the ownership or form of consideration
requirements set forth in clauses (i) and (iii) above are satisfied, the
business combination will require the approval of the holders of at least
two-thirds of the votes entitled to be cast by the holders of all the then
outstanding voting shares (the 'ratification percentage') (and the additional
majority vote described in the previous paragraph).
If our board of directors approves a business combination in accordance with
the requirements set forth in clause (ii) above, the board of directors may,
again in accordance with the voting provisions of such clause (ii), determine to
require a vote of stockholders. If a stockholder vote is required for such
business combination under applicable law (such as, for example, in the case of
a merger or liquidation), our board of directors will require the affirmative
vote of the then outstanding voting shares equal to the higher of:
(i) the ratification percentage (such affirmative vote shall not require the
additional majority vote), and
(ii) such other percentage as is required by law.
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If a stockholder vote is not required for such business combination under
law, our board may, in its discretion, either decide not to require a
stockholder vote to approve the business combination or require the affirmative
vote of the outstanding voting shares equal to (A) the ratification percentage
(such affirmative vote shall not require the additional majority vote) or
(B) such other percentage as it so determines.
An 'interested stockholder' generally is defined under our certificate of
incorporation as the beneficial owner of 10% or more of the voting power of the
outstanding voting shares (other than Triarc, its employee benefit plans, or its
majority owned subsidiaries) excluding, however, DWG Acquisition Group, LP or
any 'affiliate' or 'associate' (as each term is defined in our certificate of
incorporation). Our board of directors considers that a 10% holding, which
causes a person to be classified as an 'insider' under Section 16 of the
Exchange Act, and is double the percentage ownership required to trigger
reporting obligations under Section 13(d) of the Exchange Act, for stockholders
of public companies, is appropriate to define an interested stockholder. At the
present time, we are not aware of the existence of any stockholder or group of
stockholders that would be an interested stockholder.
A 'business combination' includes:
(i) a merger or consolidation involving us or any of our subsidiaries and
an interested stockholder or an affiliate or associate of an interested
stockholder, or an affiliate thereof,
(ii) a sale, lease or other disposition (in one or a series of
transactions) of a 'substantial part' (as defined in our certificate
of incorporation) of our assets or the assets of any of our
subsidiaries to an interested stockholder or an affiliate or associate
of any interested stockholder, or an affiliate thereof;
(iii) any sale, lease or other disposition (in one or a series of
transactions) to us or any of our subsidiaries of any assets
(excluding any voting shares, but including without limitation any
securities whether outstanding, authorized but unissued or in
treasury, issued by an interested stockholder, or by an affiliate or
associate of an interested stockholder or by an affiliate thereof) of
(a) any interested stockholder or (b) an affiliate or associate of an
interested stockholder, or an affiliate thereof, if the amount paid
therefor constitutes a substantial part of the assets of Triarc or any
subsidiary; or
(iv) an issuance or transfer (or a related series of issuances or transfers)
of our securities or the securities of any of our subsidiaries (except
upon conversion of convertible securities as a result of a pro rata
stock dividend or stock split) to an interested stockholder or an
affiliate or associate of an interested stockholder or an affiliate
thereof, for consideration aggregating $5,000,000 or more;
(v) a liquidation, dissolution, spinoff, split up or split off of us (if as
of the record date for the determination of stockholders entitled to
vote with respect thereto or, if no vote would otherwise be required,
the date the transaction is planned to be consummated, any person is an
interested stockholder);
(vi) a reclassification or recapitalization of securities (including,
without limitation, any combination of shares or reverse stock split)
of us or any of our subsidiaries or a reorganization, in any case
having the effect, directly or indirectly, of increasing the percentage
interest of an interested stockholder in any class of equity securities
of us or such subsidiary; and
(vii) any agreement, contract or other arrangement providing for any of the
transactions described in this definition of business combination.
A 'continuing director' is defined as one serving as a director whose
election or appointment or recommendation by our board of directors for election
by our stockholders was approved by at least a majority of the continuing
directors then on our board of directors.
The business combination provision described above is intended to provide
safeguards to our stockholders by requiring a higher stockholder vote than
required under Delaware law in the event another person first obtains a
substantial interest in us and then wishes to accomplish a
47
combination of such person's business with ours, or otherwise eliminate the
share holdings of the other stockholders. The federal securities law and
applicable regulations govern the disclosure required to be made to minority
stockholders in such transactions but do not assure to stockholders the fairness
of the terms of the business combination. Moreover, the statutory right of the
remaining stockholders to dissent in connection with certain business
combinations and receive the 'fair value' of their shares in cash may involve
significant expense, delay and uncertainty to dissenting stockholders. Further,
the 'fair value' of a stockholder's shares, as determined under this standard,
may not be equivalent to the minimum price as determined pursuant to the
provisions.
The business combination provision is to close partially these gaps in the
federal and state laws and to minimize certain of the potential inequities of
those business combinations that involve two or more steps by requiring that in
order to complete a business combination that is not approved by the continuing
directors, such interested stockholder must obtain the affirmative votes of at
least 75% of the voting power of the outstanding voting shares prior to
proposing the business combination (including the affirmative vote of the
holders of shares representing at least a majority of the voting power of the
outstanding voting shares exclusive of those shares beneficially owned by the
interested stockholder), or meet the minimum price and procedural requirements
of the provision and obtain the approval of at least two-thirds of the voting
power of the outstanding voting shares (and the additional majority vote). The
provision also is designed to protect those stockholders who have not tendered
or otherwise sold their shares to a purchaser who is attempting to acquire
control by ensuring that at least the same price and form of consideration are
paid to such stockholders in a business combination as were paid to stockholders
in the initial step of the acquisition. In the absence of the provision, an
interested stockholder who acquired control of us could subsequently, by virtue
of such control, force minority stockholders to sell or exchange their shares at
a price that would not reflect any premium such purchaser may have paid in order
to acquire its controlling interest, but rather at a price set by such
interested stockholder. Such a price might not only be lower than the price paid
by such purchaser in acquiring control, but also could be in a less desirable
form of consideration (e.g., equity or debt securities of the purchaser).
In many situations, the minimum price, form of consideration and procedural
requirements of the provision would require that a purchaser pay stockholders a
higher price for their shares and/or structure the transaction differently from
what would be the case without the provision. Accordingly, to the extent a
business combination were involved as part of a plan to acquire control of us,
this provision would increase the likelihood that a purchaser would negotiate
directly with our board of directors.
We believe that our board of directors normally is in a better position than
the individual stockholders to negotiate effectively on behalf of all
stockholders in that our board of directors is likely to be more knowledgeable
than any individual stockholder in assessing our business and prospects.
Accordingly, we are of the view that negotiations between our board of directors
and the purchaser would increase the likelihood that stockholders ultimately
will receive a higher price for their shares from anyone desiring to obtain
control of us through a business combination or otherwise.
Although not all acquisitions of our capital stock are made with the
objective of acquiring control of us through a subsequent business combination,
a purchaser in many cases desires to have the option to consummate such a
business combination. Assuming that to be the case, the provision would tend to
discourage purchasers whose objective is to seek control of us at a relatively
low price, since acquiring the remaining equity interest may be difficult unless
the minimum price, form of consideration and procedural requirements were
satisfied or a majority of the continuing directors were to approve the
transaction. The provision also should discourage the accumulation of large
blocks of our capital stock, which we believe to be disruptive to our stability,
and which could precipitate a change of control of us on terms unfavorable to
our other stockholders.
48
AMENDMENT OF CERTIFICATE OF INCORPORATION
Our certificate of incorporation may be amended in accordance with the
Delaware law, except that it provides that the business combination provision
described above may not be repealed, altered, changed or amended in any respect
unless such action is approved by the affirmative vote of the holders of at
least 75% of our voting shares (which 75% must include the affirmative vote of
the holders of shares representing at least a majority of the voting power of
our voting shares exclusive of those of which any interested stockholder is the
beneficial owner), unless approved by a vote of a majority of our entire board
of directors (but only if a majority of the directors acting favorably on the
matter are continuing directors), in which case the business combination
provision may be amended by the affirmative vote of holders of at least a
majority of the voting power of our voting shares (such affirmative vote does
not require the additional majority vote); and provided, further, that the
ratification percentage may be amended, altered, changed or repealed by the
affirmative vote of the holders of at least two-thirds of the voting power of
the voting shares (such affirmative vote does not require the additional
majority vote). Our by-laws may be altered, amended or repealed, or new by-laws
adopted, by (i) the affirmative vote of stockholders holding not less than a
majority of the voting power of the shares entitled to vote on such issue, or
(ii) the affirmative vote of not less than two-thirds of all of the directors
then holding office and entitled to vote on such issue.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
We may indemnify any officer or director who is made a party to any suit or
proceeding on account of being a director, officer or employee of the
corporation against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement reasonably incurred by him/her in connection with the
action, through, among other things, a majority vote of a quorum consisting of
directors who were not parties to the suit or proceeding, if the officer or
director acted in good faith and in a manner he/she reasonably believed to be in
our best interests. In a criminal proceeding, the standard is that the director
or officer had no reasonable cause to believe his/her conduct was unlawful.
Our certificate of incorporation and by-laws provide that we will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or an officer of ours against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding to the
fullest extent and in the manner set forth in and permitted by Delaware law, and
any other applicable law, as from time to time in effect. This right of
indemnification is not exclusive of any other rights to which a director or
officer may be entitled. Any repeal or modification of the applicable provisions
of Delaware law will not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought or threatened based in whole or
in part on any such state of facts.
Our certificate of incorporation provides that each person who was or is a
party to or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, by reason of the fact that such person is
or was a director or an officer of ours or is or was serving at our request as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless by us against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding to the fullest extent and in the manner set forth in and permitted by
Delaware law, and any other applicable law, as from time to time in effect. We
have the power to purchase and maintain insurance in respect of our
indemnification obligations.
A member of our board of directors, or a member of any committee designated
by our board of directors, will, in the performance of his or her duties, be
fully protected in relying in good faith upon our records and upon such
information, opinions, reports or statements presented to us
49
by any of our officers or employees, or committees of our board of directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by us or on our behalf. In discharging their duties, directors
and officers, when acting in good faith, may rely upon our financial statements
represented to them to be correct by the chief financial officer or the
controller or other of our officers having charge of our books or accounts, or
stated in a written report by an independent public or certified public
accountant or firm of such accountants fairly to reflect our financial
condition.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our Class A common stock is the
American Stock Transfer & Trust Company.
50
ARBY'S FRANCHISE TRUST SECURITIZATION NOTES
We, through Arby's Franchise Trust, issued $290,000,000 principal amount of
insured non-recourse securitization notes (the 'Securitization Notes'). The
remaining principal amount of the Securitization Notes of $249,780,000
(including current portion) as of March 30, 2003 is due no later than December
2020. However, based on current projections and assuming the adequacy of
available funds, as defined under the indenture pursuant to which the
Securitization Notes were issued, we currently estimate we will repay
$20,665,000 in 2003 with increasing annual payments to $37,377,000 in 2011 in
accordance with a targeted principal payment schedule. The Securitization Notes
are redeemable by Arby's Franchise Trust at an amount equal to the total of
remaining principal, accrued interest and the excess, if any, of the discounted
value of the remaining principal and interest payments over the outstanding
principal amount of the Securitization Notes.
Obligations under the Securitization Notes are insured by a financial
guarantee company and are collateralized by assets with an aggregate net book
value of $46,443,000 as of March 30, 2003, consisting of cash and cash
equivalents of $9,665,000, a cash equivalent reserve account of $30,531,000 and
royalty receivables of $6,247,000.
51
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain United States federal income
tax consequences that may be relevant to an investment in the notes and the
shares of Class A common stock into which the notes may be converted but does
not purport to be a complete analysis of the potential tax considerations that
you may need to consider before investing based on your particular
circumstances. This discussion is based on existing provisions of the Internal
Revenue Code ('Code'), Treasury Regulations promulgated thereunder, judicial
decisions and administrative rulings and practice, all of which are subject to
change with possible retroactive effect. This summary applies to you only if you
hold the notes and Class A common stock as capital assets within the meaning of
the Code. This summary does not discuss any estate, gift, state, local or
foreign tax law considerations.
This summary does not address all of the tax consequences that may be
relevant to all categories of investors, some of which may be subject to special
rules, such as:
o insurance companies;
o banks or other financial institutions;
o dealers and certain traders in securities or currencies;
o tax-exempt organizations;
o regulated investment companies;
o partnerships or other entities classified as partnerships
for U.S. federal income tax purposes;
o real estate investment trusts;
o grantor trusts;
o certain former citizens or residents of the United States;
o persons whose 'functional currency' is not the U.S. dollar;
o persons who hold the notes or Class A common stock as part
of a 'hedge,' 'straddle,' 'conversion' or similar
transaction; and
o persons subject to the alternative minimum tax.
In addition, this summary deals only with notes acquired at their original
issue price within the meaning of Section 1273 of the Code and does not discuss
the tax considerations applicable to subsequent purchasers of the notes,
including application of the 'market discount' and 'acquisition premium' rules.
PERSONS CONSIDERING THE PURCHASE OF THE NOTES ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH REGARD TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
TAX CONSEQUENCES TO U.S. HOLDERS
As used herein, the term 'U.S. Holder' means a beneficial owner of notes or
Class A common stock that is for U.S. federal income tax purposes:
o a citizen or individual resident of the United States;
o a corporation or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or
under the laws of the United States or any State thereof
(including the District of Columbia);
o an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; and
o a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the
trust and (b) one or more United States persons have the
authority to control all substantial decisions of the trust;
or an electing trust in existence on August 20, 1996 to the
extent provided in Treasury Regulations.
52
If a partnership holds notes or common stock, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner in a partnership, you should consult your own
tax advisor.
INTEREST INCOME ON THE NOTES
U.S. Holders will be required to recognize as ordinary income any interest
paid or accrued on the notes, in accordance with their regular method of
accounting for U.S. federal income tax purposes. We may be required to make
additional payments to holders of notes as liquidated damages, as described
under 'Description of Notes -- Registration Rights of the Noteholders,' above.
According to Treasury Regulations, the possibility that any such payments in
excess of stated interest or principal will be made will not affect the amount
of interest income you recognize if there is only a remote chance as of the date
the notes were issued that such payments will be made. We believe that the
likelihood that we will be obligated to make any such payments is remote.
Therefore, we do not intend to treat the potential payment of liquidated damages
as part of the yield on the notes. Our determination that this contingency is
remote is binding on you unless you disclose your contrary position in the
manner required by applicable Treasury Regulations. If you are a U.S. Holder and
we pay liquidated damages on the notes, you will be required to recognize such
amounts as income. Our determination is not, however, binding on the Internal
Revenue Service ('IRS'), and if the IRS were to challenge this determination,
you might be required to accrue income on your notes in excess of stated
interest, and to treat as ordinary income rather than capital gain any gain
realized on the taxable disposition of a note before the resolution of the
contingency.
CONSTRUCTIVE DIVIDENDS ON THE NOTES
If at any time we increase the conversion rate, either at our discretion or
pursuant to the conversion rate adjustment provisions, the increase may be
deemed to be the payment of a taxable dividend to the U.S. Holders of the notes.
For example, an increase in the conversion rate in the event of distributions of
our debt instruments, or our assets, or an increase in the event of certain cash
dividends, generally will result in deemed dividend treatment to U.S. Holders of
the notes, but an increase in the event of stock dividends or the distribution
of rights to subscribe for Class A common stock generally will not.
SALE, EXCHANGE, OR OTHER DISPOSITION OF THE NOTES
Upon a sale, exchange or disposition of a note other than a conversion of
the note into common stock, a U.S. Holder will generally recognize capital gain
or loss in an amount equal to the difference between the amount realized on the
sale, exchange or disposition (not including any amount attributable to accrued
but unpaid interest not previously included in income, which will be taxable as
ordinary income) and such U.S. Holder's adjusted tax basis in the note. The
amount realized by the holder will include the amount of cash and the fair
market value of any other property received for the note. A U.S. Holder's
adjusted tax basis in a note will generally be equal to the U.S. Holder's
purchase price for the note. Such capital gain or loss will be long-term capital
gain or loss if the holder held the note for more than one year. The
deductibility of capital losses is subject to limitations.
CONVERSION OF THE NOTES FOR CLASS A COMMON STOCK
A U.S. holder generally will not recognize any income, gain or loss on
converting a note into common stock, except that the fair market value of Class
A common stock received with respect to accrued interest will be taxed as a
payment of interest as described under 'Tax Consequences to U.S.
Holders -- Interest Income on the Notes,' above. If the holder receives cash in
lieu of a fractional share of common stock, however, the holder would be treated
as if he received the fractional share and then had the fractional share
redeemed for the cash. The holder would recognize capital gain or loss equal to
the difference between the cash received and that portion
53
of his basis in the Class A common stock attributable to the fractional share.
The holder's aggregate basis in the Class A common stock will equal the holder's
adjusted basis in the note, increased, for a cash method holder, by the amount
of income recognized with respect to accrued interest. The holder's holding
period for the Class A common stock will include the period during which he held
the note, except that the holding period of any Class A common stock received
with respect to accrued interest will commence on the date after conversion.
CONVERSION OF THE NOTES FOR CLASS A COMMON STOCK AND CASH
If a U.S. Holder converts a note and we deliver a combination of Class A
common stock and cash (and such cash is not merely received in lieu of a
fractional share of common stock) the tax treatment to the holder is uncertain.
Assuming the notes are 'securities' for U.S. federal income tax purposes,
which we believe is likely, the holder may recognize capital gain (but not
capital loss), if any, on the note so converted in an amount equal to the lesser
of the gain realized (being the excess, if any, of the fair market value of the
Class A common stock received plus cash received over the adjusted tax basis in
the note converted therefor), and the cash received. Such gain would generally
be long-term capital gain if the holder held the note for more than one year.
The holder's adjusted tax basis in the Class A common stock received should
generally equal the adjusted tax basis of the note converted, decreased by the
cash received, and increased by the amount of gain recognized. The holder's
holding period in the Class A common stock received upon conversion of the notes
would include the holding period of the note so converted. Alternatively, the
cash payment may be treated as proceeds from the sale of a portion of the note,
and taxed in the manner described under 'Tax Consequences To U.S.
Holders -- Sale, Exchange or Other Disposition of the Notes,' above. In such
case, the holder's basis in the note would be allocated pro rata between the
Class A common stock received and the portion of the note that is treated as
sold for cash. The holding period for any Class A common stock received in the
conversion would include the holding period of the note. Holders should consult
their own tax advisors regarding the proper treatment to them of the receipt of
a combination of cash and Class A common stock upon a conversion.
TAXATION OF DISTRIBUTIONS ON OUR CLASS A COMMON STOCK
Distributions paid on our Class A common stock received upon conversion of a
note will be treated as a dividend to the extent paid out of current or
accumulated earnings and profits (as determined under U.S. federal income tax
principles) and will be includible in income by the U.S. Holder and taxable when
received or accrued, in accordance with such U.S. Holder's method of accounting.
If a distribution exceeds current and accumulated earnings and profits, the
excess will be first treated as a tax-free return of the U.S. Holder's
investment, up to the holder's tax basis in the common stock. Any remaining
excess will be treated as a capital gain. If a U.S. Holder is a U.S.
corporation, it generally would be able to claim a dividends received deduction
equal to a portion of any dividends received, subject to customary limitations
and conditions.
SALE OR OTHER DISPOSITION OF OUR CLASS A COMMON STOCK
Unless a nonrecognition provision applies, gain or loss realized by a U.S.
Holder on the sale or other disposition of our Class A common stock received
upon a conversion of a note will be recognized as capital gain or loss for U.S.
federal income tax purposes, and will be long-term capital gain or loss if the
U.S. Holder held the Class A common stock for more than one year. The amount of
the U.S. Holder's gain or loss will be equal to the difference between the U.S.
Holder's tax basis in the Class A common stock disposed of and the amount
realized on the disposition.
54
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information returns will be filed with the IRS and provided to U.S. Holders
in connection with the payments on the notes or our Class A common stock and the
proceeds from a sale or other disposition of the notes or our common stock,
unless an exemption is available. A U.S. Holder may be subject to United States
backup withholding on these payments at the rates specified in the Code if it
fails to provide an accurate taxpayer identification number and to comply with
certain certification procedures or otherwise establish an exemption from backup
withholding. The amount of any backup withholding from a payment will be allowed
as a credit against the U.S. Holder's U.S. federal income tax liability and may
entitle the U.S. Holder to a refund, provided the required information is
furnished to the IRS.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
As used herein, the term 'Non-U.S. Holder' means a beneficial owner of a
note or Class A common stock that is not a U.S. Holder. Special rules may apply
to certain Non-U.S. Holders such as 'controlled foreign corporations', 'passive
foreign investment companies', 'foreign personal holding companies', persons
eligible for benefits under income tax treaties to which the United States is a
party and certain U.S. expatriates. Non-U.S. Holders should consult their own
tax advisors to determine the U.S. federal, state, local and other tax
consequences that may be relevant for them.
PAYMENT OF INTEREST ON THE NOTES
Payments of interest on the notes to any Non-U.S. Holder will be exempt from
U.S. federal income and withholding tax, provided that:
o the Non-U.S. Holder does not own, actually or
constructively, 10% or more of the total combined voting
power of all classes of our stock entitled to vote and is
not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership and is not a bank
receiving certain types of interest,
o the certification requirement described below has been
fulfilled with respect to the Non-U.S. Holder, and
o such payments are not effectively connected with the conduct
by such Non-U.S. Holder of a trade or business in the United
States.
The certification requirement referred to in the preceding paragraph will be
fulfilled if the beneficial owner of a note certifies to us on IRS Form W-8BEN
under penalties of perjury, that it is not a U.S. person and provides its name
and address or otherwise satisfies applicable documentation requirements.
We may be required to make payments of liquidated damages if we do not file
or cause to be declared effective a registration statement, as described under
'Description of Notes -- Registration Rights of the Noteholders,' above. We
believe that the likelihood that we will be obligated to make any such payments
is remote. If any such payments are made, we intend to treat such payments made
to Non-U.S. Holders as subject to U.S. federal withholding tax at a rate of 30%
subject to reduction or exemption (a) by an applicable treaty if the Non-U.S.
Holder provides an IRS Form W-8BEN certifying that it is entitled to such treaty
benefits or (b) upon the receipt of an IRS Form W-8ECI from a Non-U.S. Holder
claiming that such payments are effectively connected with the conduct of a U.S.
trade or business.
SALE, EXCHANGE OR OTHER DISPOSITION OF THE NOTES
Non-U.S. Holders generally will not be subject to U.S. federal income tax on
any gain realized on the sale, exchange or other disposition of the notes,
unless:
o such holder is an individual who is present in the United
States for 183 days or more in the taxable year of
disposition and certain other conditions are met,
55
o the holder is subject to special rules applicable to certain
former citizens or former residents of the United States,
o the holder is engaged in a trade or business in the United
States and such gain is effectively connected with the
conduct of such trade or business, or
o the rules of the Foreign Investment in Real Property Tax Act
('FIRPTA') (described below) treat the gain as effectively
connected with a U.S. trade or business.
The FIRPTA rules may apply to a sale, exchange or other disposition of notes if
we are, or have been within the shorter of the five-year preceding such sale,
exchange or disposition and the period the Non-U.S. Holder held the notes, a
U.S. real property holding corporation ('USRPHC'). In general, we would be a
USRPHC if interests in U.S. real estate exceed 50% of our assets in U.S. and
foreign real estate, and any other of our assets used or held for use in a trade
or business. We do not believe that we are a USRPHC or that we will become one
in the future although no assurance can be given in this regard.
CONVERSION OF THE NOTES
A Non-U.S. Holder generally will not recognize any gain or loss on
converting a note into common stock. Any gain recognized as a result of the
holder's receipt of cash in lieu of a fractional share of Class A common stock
would also generally not be subject to U.S. federal income tax. See 'Tax
Consequences To Non-U.S. Holders -- Sale or Exchange of Class A Common Stock,'
below. A Non-U.S. Holder also generally will not recognize gain or loss on
converting a note into a combination of Class A common stock and cash unless:
o such holder is an individual who is present in the United
States for 183 days or more in the taxable year of
disposition and certain other conditions are met,
o the holder is subject to special rules applicable to certain
former citizens or former residents of the United States,
o the holder is engaged in a trade or business in the United
States and such gain is effectively connected with the
conduct of such trade or business, or
o the FIRPTA rules treat the gain as effectively connected
with a U.S. trade or business.
See 'Tax Consequences To U.S. Holders -- Conversion of the Notes for Class A
Common Stock and Cash,' above, regarding the possible treatment of such gain or
loss.
DIVIDENDS
Dividends (and any constructive dividends resulting from certain adjustments
to the conversion rate, see 'Tax Consequences To U.S. Holders -- Constructive
Dividends on the Notes,' above) paid to a Non-U.S. Holder of Class A common
stock generally will be subject to U.S. withholding tax at a 30% rate, subject
to reduction or exemption under an applicable treaty, unless such Non-U.S.
Holder is engaged in trade or business in the United States and such dividends
are effectively connected with the conduct of such trade or business. In order
to obtain a reduced rate of withholding, a Non-U.S. Holder will be required to
provide a properly executed IRS Form W-8BEN certifying its entitlement to
benefits under a treaty.
SALE OR EXCHANGE OF CLASS A COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income and
withholding tax on gain realized on a sale or other disposition of our Class A
common stock received upon a conversion of a note, unless:
o such holder is an individual who is present in the United
States for 183 days or more in the taxable year of
disposition and certain other conditions are met,
o the holder is subject to special rules applicable to certain
former citizens or former residents of the United States,
56
o the holder is engaged in a trade or business in the United
States and such gain is effectively connected with the
conduct of such trade or business, or
o the FIRPTA rules treat the gain as effectively connected
with a U.S. trade or business.
INCOME OR GAINS EFFECTIVELY CONNECTED WITH A U.S. TRADE OR BUSINESS
The preceding discussion of the tax consequences of the purchase, ownership
or disposition of notes or Class A common stock by a Non-U.S. Holder assumes
that the holder is not engaged in a U.S. trade or business. If any interest on
notes, dividends on common stock, or gain from the sale, exchange or other
disposition of notes (including from conversion of the notes into a combination
of stock and cash) or Class A common stock is effectively connected with a U.S.
trade or business conducted by the Non-U.S. Holder, then the income or gain will
generally be subject to U.S. federal income tax in the same manner as if earned
by a U.S. Holder. If the Non-U.S. Holder is a corporation, that portion of its
earnings and profits that are effectively connected with its U.S. trade or
business generally would be subject to a branch profits tax. The branch profits
tax rate is generally 30%, although an applicable tax treaty might provide for a
reduced rate. Payments of interest or dividends that are effectively connected
with a U.S. trade or business, and therefore included in the gross income of a
Non-U.S. Holder, will not be subject to the 30% withholding tax so long as the
holder certifies its qualification for such exemption by providing a properly
executed IRS Form W-8ECI.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information returns will be filed with the IRS and provided to each Non-U.S.
Holder with respect to any payments on the notes or Class A common stock that
are subject to withholding or that are exempt from U.S. withholding tax pursuant
to a tax treaty or other reason. Dividends or interest paid to a Non-U.S. Holder
of our Class A common stock or notes will generally be exempt from backup
withholding if the Non-U.S. Holder provides a properly executed IRS Form W-8BEN
or otherwise establishes an exemption from withholding.
The payment of proceeds from the disposition of the notes or our Class A
common stock to or through the United States office of any broker, United States
or foreign, will be subject to information reporting and possible backup
withholding unless the owner certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption. The payment of the
proceeds from the disposition of the notes or our Class A common stock to or
through a foreign office of a foreign broker will generally not be subject to
information reporting or backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded or
credited against the Non-U.S. Holder's U.S. federal income tax liability, if
any, if the Non-U.S. Holder provides, on a timely basis, the required
information to the IRS.
DISCLOSURE AUTHORIZATION
Notwithstanding any provision in this prospectus or any agreement to the
contrary, the initial purchaser, each holder and offeree (and their respective
employees, representatives and other agents) may disclose to any and all
persons, without limitation of any kind, the U.S. federal income tax treatment
and tax structure of the notes and all materials of any kind (including opinions
or other tax analyses) that are provided by us or the initial purchaser relating
to such tax treatment and tax structure, except where confidentiality is
reasonably necessary to comply with securities laws.
57
SELLING SECURITYHOLDERS
We originally sold the notes to the initial purchaser in a private
placement. The notes were subsequently resold by the initial purchaser to
purchasers, including the selling securityholders listed below, in transactions
exempt from registration under the Securities Act. The following table provides,
as of June 18, 2003, information with respect to each selling securityholder who
is entitled to use this prospectus to offer notes and the underlying shares of
Class A common stock. This information has been obtained from the selling
securityholders.
NUMBER OF SHARES PERCENTAGE OF
PRINCIPAL AMOUNT OF CLASS A CLASS A
OF NOTES SHARES OF NUMBER OF SHARES COMMON STOCK COMMON STOCK
BENEFICIALLY CLASS A OF CLASS A BENEFICIALLY BENEFICIALLY
OWNED AND COMMON STOCK COMMON STOCK OWNED AFTER OWNED AFTER
SELLING OFFERED HEREBY BENEFICIALLY OFFERED COMPLETION OF COMPLETION OF
SECURITYHOLDER ($) OWNED(1) HEREBY(1) THE OFFERING THE OFFERING (%)
-------------- ---------------- ------------ ---------------- ---------------- ----------------
1976 Distribution
Trust FBO A.R.
Lauder/Zinterhofer.. 5,000 125 125 -- --
2000 Revocable Trust
FBO A.R.
Lauder/Zinterhofer.. 5,000 125 125 -- --
Advent Convertible
Master
Cayman L.P......... 3,949,000 98,725 98,725 -- --
Alcon Laboratories... 281,000 7,025 7,025 -- --
Allentown City
Firefighters
Pension Plan....... 18,000 450 450 -- --
Allentown City
Officers &
Employees Pension
Fund............... 12,000 300 300 -- --
Allentown City Police
Pension Plan....... 24,000 600 600 -- --
Alpha US Sub
Fund 4, LLC........ 218,000 5,450 5,450 -- --
American Investors
Life Insurance
Co................. 300,000 7,500 7,500 -- --
Araphoe County
Colorado........... 44,000 1,100 1,100 -- --
Argent Classic
Convertible
Fund L.P........... 1,000,000 25,000 25,000 -- --
Argent LowLev
Convertible
Arbitrage
Fund LLC........... 1,100,000 27,500 27,500 -- --
Arlington County
Employees
Retirement System.. 487,000 12,175 12,175 -- --
Asante Health
Systems............ 63,000 1,575 1,575 -- --
British Virgin
Islands Social
Security Board..... 64,000 1,600 1,600 -- --
City University of
New York........... 109,000 2,725 2,725 -- --
City of New Orleans.. 149,000 3,725 3,725 -- --
(table continued on next page)
58
(table continued from previous page)
NUMBER OF SHARES PERCENTAGE OF
PRINCIPAL AMOUNT OF CLASS A CLASS A
OF NOTES SHARES OF NUMBER OF SHARES COMMON STOCK COMMON STOCK
BENEFICIALLY CLASS A OF CLASS A BENEFICIALLY BENEFICIALLY
OWNED AND COMMON STOCK COMMON STOCK OWNED AFTER OWNED AFTER
SELLING OFFERED HEREBY BENEFICIALLY OFFERED COMPLETION OF COMPLETION OF
SECURITYHOLDER ($) OWNED(1) HEREBY(1) THE OFFERING THE OFFERING (%)
-------------- ---------------- ------------ ---------------- ---------------- ----------------
Delaware Public
Employees
Retirement System.. 1,129,000 28,225 28,225 -- --
Dodeca Fund, L.P..... 700,000 17,500 17,500 -- --
Grace Convertible
Arbitrage
Fund, Ltd.......... 2,250,000 56,250 56,250 -- --
Grady Hospital
Foundation......... 98,000 2,450 2,450 -- --
HFR Convertible
Arbitrage Account.. 232,000 5,800 5,800 -- --
HFR TQA Master Trust
c/o TQA Investors,
LLC................ 500,000 12,500 12,500 -- --
KD Convertible
Arbitrage Fund
L.P................ 1,000,000 25,000 25,000 -- --
LDG Limited.......... 500,000 12,500 12,500 -- --
Lyxor................ 555,000 13,875 13,875 -- --
Lyxor Master Fund.... 1,400,000 35,000 35,000 -- --
Man Convertible Bond
Master
Fund, Ltd.......... 6,379,000 159,475 159,475 -- --
McMahan Securities
Co. L.P............ 1,025,000 25,625 25,625 -- --
Minnesota Power and
Light.............. 1,077,000 26,925 26,925 -- --
Municipal Employees.. 175,000 4,375 4,375 -- --
New Orleans
Firefighters
Pension/Relief
Fund............... 29,000 725 725 -- --
Occidental Petroleum
Corporation........ 194,000 4,850 4,850 -- --
Policeman and Fireman
Retirement System
of the City of
Detroit............ 428,000 10,700 10,700 -- --
Pro-mutual........... 547,000 13,675 13,675 -- --
Royal Bank of
Canada............. 2,500,000 62,600 62,500 100 *
Satellite Convertible
Arbitrage Master
Fund, LLC.......... 2,000,000 50,000 50,000 -- --
Sphinx Fund c/o TQA
Investors, LLC..... 100,000 2,500 2,500 -- --
St. Thomas
Trading, Ltd....... 11,746,000 293,650 293,650 -- --
State of Maryland
Retirement Agency.. 2,337,000 58,425 58,425 -- --
Tag Associates....... 46,000 1,150 1,150 -- --
(table continued on next page)
59
(table continued from previous page)
NUMBER OF SHARES PERCENTAGE OF
PRINCIPAL AMOUNT OF CLASS A CLASS A
OF NOTES SHARES OF NUMBER OF SHARES COMMON STOCK COMMON STOCK
BENEFICIALLY CLASS A OF CLASS A BENEFICIALLY BENEFICIALLY
OWNED AND COMMON STOCK COMMON STOCK OWNED AFTER OWNED AFTER
SELLING OFFERED HEREBY BENEFICIALLY OFFERED COMPLETION OF COMPLETION OF
SECURITYHOLDER ($) OWNED(1) HEREBY(1) THE OFFERING THE OFFERING (%)
-------------- ---------------- ------------ ---------------- ---------------- ----------------
The Grable
Foundation......... 65,000 1,625 1,625 -- --
TQA Master
Fund, Ltd.......... 2,600,000 65,000 65,000 -- --
TQA Master Plus
Fund, Ltd.......... 2,600,000 65,000 65,000 -- --
Trustmark
Insurance.......... 248,000 6,200 6,200 -- --
Xavex-Convertible
Arbitrage 7 Fund
c/o TQA Investors,
LLC................ 200,000 5,000 5,000 -- --
Xavex Risk Arbitrage
Fund 2............. 300,000 7,500 7,500 -- --
Zurich Institutional
BenchmarkMaster
Fund Ltd........... 400,000 10,000 10,000 -- --
Zurich Institutional
Benchmark Master
Fund, Ltd.
c/o TQA
Investors, LLC..... 500,000 12,500 12,500 -- --
---------
* Less than one percent.
(1) Includes shares of Class A common stock issuable upon
conversion of the notes, and assumes a conversion rate of 25
shares per $1,000 principal amount of notes, which
conversion rate is subject to adjustment as described under
'Description of the Notes-Conversion of Notes.' Accordingly,
the number of shares of Class A common stock issuable upon
conversion of the notes may increase or decrease from time
to time. Under the terms of the indenture, we are not
required to issue fractional shares of Class A common stock
upon conversion of the notes and, in lieu thereof, will pay
cash.
Except as described above, none of the selling securityholders listed above
has, or within the past three years had, any position, office or any material
relationship with us or any of our affiliates.
Because the selling securityholders may offer all or some portion of the
above-referenced securities under this prospectus or otherwise, no estimate can
be given as to the amount of percentage that will be held by the selling
securityholders upon termination of any sale. In addition, the selling
securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of such securities since the date on which
information in this table is provided, in transactions exempt from the
registration requirements of the Securities Act. Information about the selling
securityholders may change from time to time. Any changed information will be
set forth in prospectus supplements, if required.
Only selling securityholders identified in the above table who beneficially
own the securities set forth opposite their respective names in the second and
fourth columns may sell offered securities under the registration statement of
which this prospectus forms a part. Information about other selling
securityholders will be set forth in prospectus supplements, if required.
60
PLAN OF DISTRIBUTION
The securities offered by this prospectus are being registered to permit the
resale of such securities by the selling securityholders from time to time after
the date of this prospectus. We will not receive any of the proceeds from the
sale by the selling securityholders of these securities. We will bear the fees
and expenses incurred in connection with our obligation to register these
securities. These fees and expenses include registration and filing fees,
printing and duplication expenses, fee and disbursement of our counsel. However,
the selling securityholders will pay all underwriting discounts and selling
commissions, if any, and their own legal expenses.
The selling securityholders may sell the securities from time to time
directly or through underwriters (in accordance with the registration rights
agreement), broker-dealers or agents, in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale, or at negotiated prices. Such sales may be
effected in transactions (which may involve block transactions):
o on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services
or in over-the-counter market; or
o through the writing of options.
In connection with sales of the securities or otherwise, the securityholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the securities and deliver securities to close out such
short positions, or loan or pledge securities to broker-dealers that in turn may
sell such securities.
If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any securities offered hereby through a
secondary distribution or a purchase by a broker or dealer, or if other material
changes are made in the plan of distribution of such securities, a prospectus
supplement will be filed, if necessary, under the Securities Act disclosing the
material terms and conditions of the arrangement. The underwriter or
underwriters with respect to an underwritten offering of such securities and the
other material terms and conditions of the underwriting will be set forth in a
prospectus supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of the prospectus supplement. In connection with the sale of
securities using this prospectus, underwriters will receive compensation in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of offered securities for whom they may act as agent.
Underwriters may sell to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
There can be no assurance that any selling securityholder will sell any or
all of their notes and Class A common stock pursuant to this prospectus. In
addition, any securities which can be sold under Rule 144 or Rule 144A under the
Securities Act may be sold under Rule 144 or Rule 144A, respectively, rather
than pursuant to this prospectus.
The selling securityholders and any underwriters, broker-dealers or agents
participating in the distribution of the securities may be deemed to be
'underwriters' within the meaning of the Securities Act, and any profit on the
sale of the securities offered hereby by the selling securityholders and any
commissions received by any such underwriters, broker-dealers or agents may be
deemed to be underwriting commissions under the Securities Act. If the selling
securityholders were deemed to be underwriters, the selling securityholders may
be subject to certain statutory liabilities, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 of the Exchange Act.
The selling securityholders and any other person participating in the
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations under the
61
Exchange Act, including without limitation, Regulation M, which may limit the
timing of purchases and sales of any of the securities offered hereby by the
selling securityholders and any other relevant person. Furthermore, Regulation M
may restrict the ability of any person engaged in the distribution of such
securities to engage in market-making activities with respect to the particular
securities being distributed. All of the above may affect the marketability of
the securities offered hereby and the ability of any person or entity to engage
in market-making activities with respect to such securities.
Under the securities law of various states, the securities offered hereby
may be sold in those states only through registered or licensed brokers or
dealers. In addition, in various states the securities offered hereby may not be
sold unless such securities have been registered or qualified for sale in the
state or an exemption from registration or qualification is available and is
complied with.
We have agreed to indemnify the selling securityholders against some civil
liabilities, including some liabilities arising under the Securities Act, and
the selling securityholders will be entitled to contribution from us in
connection with those liabilities. The selling securityholders will indemnify us
against some civil liabilities, including liabilities arising under the
Securities Act, and will be entitled to contribution from the selling
securityholders in connection with those liabilities.
We are permitted to suspend the use of this prospectus under some
circumstances relating to pending corporate developments, public filings with
the SEC and similar events for a period not to exceed 45 days in any three-month
period and not to exceed an aggregate of 120 days in any 12-month period.
Notwithstanding the foregoing, we will be permitted to suspend the use of the
prospectus for up to 60 days in any 3-month period under certain circumstances
relating to possible acquisitions, financings or other similar transactions. In
addition, if the duration of such suspension exceeds the periods
above-mentioned, we have agreed to pay liquidated damages. Please refer to the
section entitled 'Description of the Notes -- Registration Rights of the
Noteholders.'
The outstanding Class A common stock trades on the New York Stock Exchange
under the symbol 'TRY.' We do not intend to apply for listing of the notes on
any securities exchange or for quotation through an automated quotation system.
Accordingly, we cannot assure you about the development of liquidity or any
trading market for the notes.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York has passed
upon the validity of the notes offered by this prospectus for us and upon the
validity of the shares of Class A common stock issuable upon conversion of the
notes.
INDEPENDENT AUDITORS
The consolidated financial statements of Triarc incorporated by reference
into this prospectus from our Annual Report on Form 10-K for the year ended
December 29, 2002 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report incorporated herein by reference.
The consolidated financial statements of Encore Capital Group, Inc.
(formerly, MCM Capital Group, Inc.) incorporated by reference into this
prospectus from our Annual Report on Form 10-K for the year ended December 29,
2002 have been audited by Ernst & Young LLP for the year ended December 31,
2000, as stated in its report incorporated herein by reference.
The consolidated financial statements of Encore Capital Group, Inc.
incorporated by reference in this Prospectus have been audited by BDO
Seidman, LLP, independent auditors, to the extent and for the periods set forth
in their report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
62
[TRIARC LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the expenses to be borne by the
Registrant in connection with the distribution of the offered securities. All
amounts other than the filing fee for the registration statement are estimates.
Filing fee for Registration Statement....................... $ 14,158
Printing fees and expenses.................................. $ 95,000
Legal fees and expenses..................................... $ 475,000
Accounting and auditor fees and expenses.................... $ 425,000
Miscellaneous............................................... $ 2,842
----------
Total................................................... $1,012,000
----------
----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The certificate of incorporation of Triarc Companies, Inc. (the 'Registrant'
or the 'Company'), as amended to date (the 'Triarc Charter'), provides
indemnification to the extent not prohibited by Delaware law (including as such
law may be amended in the future to be more favorable to directors and
officers). Section 145 of the General Corporation Law of the State of Delaware
(the 'DGCL') provides that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed civil, criminal, administrative or investigative action, suit or
proceeding (other than an action by or in the right of the corporation, such as
a derivative action) by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent for any
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (an 'Other Entity'). The Triarc Charter provides that its officers
and directors, and any person serving in any capacity at the request of the
Company for an Other Entity shall be entitled to such indemnification; however,
the Board of Directors of the Company (the 'Triarc Board') may specifically
grant such indemnification to other persons in respect of service to the Company
or an Other Entity. The Triarc Charter specifies that any director or officer of
the Company serving in any capacity with a majority owned subsidiary or any
employee benefit plan of the Company or of any majority owned subsidiary shall
be deemed to be doing so at the request of the Company.
Under Section 145 of the DGCL, depending on the nature of the proceeding, a
corporation may indemnify against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person so indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his or
her conduct was unlawful. In the case of a derivative action, no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability, such person is fairly and reasonably entitled to indemnity for
such expenses as such court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation is successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred in connection therewith. However, if such director or
officer is not successful in the defense of any such action, suit or proceeding,
or in the defense of any claim, issue or matter therein, he or she shall only be
indemnified by the corporation as authorized in the specific case upon a
determination that indemnification is proper because he or
II-1
she met the applicable standard set forth above as determined by a majority of
the disinterested directors, by independent legal counsel or by the
stockholders.
The Triarc Charter provides that expenses are to be advanced prior to the
final disposition of a proceeding upon the receipt by the Company of an
undertaking, as required by the DGCL, that the director or officer or other
indemnified person will repay such advances if he or she is ultimately found not
to be entitled to indemnification under the DGCL.
The Triarc Charter permits a person entitled to indemnity to bring an action
in court to obtain such indemnity and provides that, in any such action, the
court will not be bound by a decision of the Triarc Board, independent counsel
or stockholders that such person is not entitled to indemnification. Such person
is also indemnified for any expenses incurred in connection with successfully
establishing his or her right to indemnification in any such proceeding. The
Triarc Charter expressly provides that the right to indemnification thereunder
is a contract right and, therefore, cannot be retroactively eliminated by a
later stockholder vote, and is not an exclusive right and, therefore, the
Company may provide other indemnification, if appropriate.
The Company also enters into indemnification agreements with its directors
and officers indemnifying them against liability they may incur in their
capacity as such. The indemnification agreements do not provide indemnification
to the extent that the indemnitee is indemnified by the Company under the Triarc
Charter, its bylaws, its directors' and officers' liability insurance, or
otherwise. Additionally, the indemnification agreements do not provide
indemnification (i) for the return by the indemnitee of any illegal remuneration
paid to him or her; (ii) for any profits payable by the indemnitee to the
Company pursuant to Section 16(b) of the Exchange Act; (iii) for any liability
resulting from the indemnitee's fraudulent, dishonest or willful misconduct;
(iv) for any amount the payment of which is not permitted by applicable law;
(v) for any liability resulting from conduct producing unlawful personal
benefit; or (vi) if a final court adjudication determines such indemnification
is not lawful.
Determinations as to whether an indemnitee is entitled to be paid under the
indemnification agreements may be made by the majority vote of a quorum of
disinterested directors, independent legal counsel selected by the Triarc Board,
a majority of disinterested Company stockholders or by a final adjudication of a
court of competent jurisdiction. In the event that the Company undergoes a
'Change of Control' (as defined in the indemnification agreements) all such
determinations shall be made by special independent counsel selected by the
indemnitee and approved by the Company, which approval may not be unreasonably
withheld. In certain circumstances, an indemnitee may require the Company to
establish a trust fund to assure that funds will be available to pay any amounts
which may be due such indemnitee under an indemnification agreement.
As permitted by Section 102(b)(7) of the DGCL, the Triarc Charter includes a
provision which eliminates the personal liability of a director to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director, other than liability (i) for the breach of a director's duty of
loyalty to the Company and its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL (relating to unlawful payment of a
dividend and unlawful stock purchase and redemption) or (iv) for any transaction
from which the director derived any improper personal benefit.
Finally, the Triarc Charter authorizes the Company, as permitted by the
DGCL, to purchase directors' and officers' liability insurance. The Company
carries directors' and officers' liability insurance covering losses up to
specified amounts.
The foregoing statements are subject to the detailed provisions of Sections
145 and 102 of the DGCL, the Triarc Charter and the referenced indemnification
agreements.
II-2
ITEM 16. EXHIBITS
4.1* Indenture, dated as of May 19, 2003, between Triarc Companies, Inc. and
Wilmington Trust Company, as Trustee.
4.2* Registration Rights Agreement, dated as of May 19, 2003, by and among
Triarc Companies, Inc. and Morgan Stanley & Co. Incorporated.
5.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP.
12.1* Ratio of Earnings to Fixed Charges.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of BDO Seidman, LLP.
23.4 Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP
(included in Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of the Registrant
(included on the signature pages hereof).
25.1* Statement of Eligibility under the Trust Indenture Act of 1939 on
Form T-1 of Wilmington Trust Company to act as Trustee under the
Indenture, dated as of May 19, 2003.
---------
* Filed herewith.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the 'Calculation of Registration
Fee' table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
II-3
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on June 19, 2003.
TRIARC COMPANIES, INC.
(Registrant)
By: /s/ NELSON PELTZ
..................................
NELSON PELTZ
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
The officers and directors of Triarc Companies, Inc. whose signatures appear
below hereby constitute and appoint Nelson Peltz and Peter W. May and each of
them (with full power to each of them to act alone), their true and lawful
attorneys-in-fact, with full powers of substitution and resubstitution, to sign
and execute on behalf of the undersigned any and all amendments, including any
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and each of the undersigned does hereby
ratify and confirm all that said attorneys-in-fact shall do or cause to be done
by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below on June 19, 2003 by the following persons in the
capacities indicated.
SIGNATURE TITLES
--------- ------
/s/ NELSON PELTZ Chairman and Chief Executive Officer and Director
........................................... (Principal Executive Officer)
NELSON PELTZ
/s/ PETER W. MAY President and Chief Operating Officer and Director
........................................... (Principal Operating Officer)
PETER W. MAY
/s/ FRANCIS T. MCCARRON Senior Vice President and Chief Financial Officer
........................................... (Principal Financial Officer)
FRANCIS T. MCCARRON
/s/ FRED H. SCHAEFER Senior Vice President and Chief Accounting Officer
........................................... (Principal Accounting Officer)
FRED H. SCHAEFER
/s/ HUGH L. CAREY Director
...........................................
HUGH L. CAREY
/s/ CLIVE CHAJET Director
...........................................
CLIVE CHAJET
/s/ JOSEPH A. LEVATO Director
...........................................
JOSEPH A. LEVATO
/s/ DAVID E. SCHWAB II Director
...........................................
DAVID E. SCHWAB II
/s/ RAYMOND S. TROUBH Director
...........................................
RAYMOND S. TROUBH
/s/ GERALD TSAI, JR. Director
...........................................
GERALD TSAI, JR.
II-5
EXHIBIT INDEX
4.1* Indenture, dated as of May 19, 2003, between Triarc Companies, Inc. and
Wilmington Trust Company, as Trustee.
4.2* Registration Rights Agreement, dated as of May 19, 2003, by and among
Triarc Companies, Inc. and Morgan Stanley & Co. Incorporated.
5.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP.
12.1* Ratio of Earnings to Fixed Charges.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Ernst & Young LLP.
23.3* Consent of BDO Seidman, LLP.
23.4 Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of the Registrant
(included on the signature pages hereof).
25.1* Statement of Eligibility under the Trust Indenture Act of 1939 on
Form T-1 of Wilmington Trust Company to act as Trustee under the
Indenture, dated as of May 19, 2003.
---------
* Filed herewith.
II-6
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.....................'r'